Crypto and protest: Kazakhstan crisis shows vulnerability of Bitcoin
The situation in Kazakhstan has dealt a serious blow to the value of cryptocurrencies.
On the morning of January 7, the Bitcoin rate continued to fall. The cost of the world’s main cryptocurrency fell by eight percent below $42,000, and altcoins also suffered losses. A significant decrease in the hash rate — the total computing power of mining equipment — was recorded in the pools that are widely used by Kazakhstanis. 1THash, OKExPool and KuCoinPool also suffered from the blow, while larger pools such as F2Pool, AntPool and ViaBTC, have seen their performance decline.
Experts directly associate Bitcoin’s slump with the lack of internet in Kazakhstan. On January 7, Kazakhstanis woke up to the news of internet suspension as the anti-government protests shook the country.
Nikita Zuborev, senior analyst of the Bestchange.ru project, told Russian media that the situation in Kazakhstan is more of a catalyst for price phenomenon than a cause.
“It would be shortsighted to believe that what happened will not affect the crypto market at all. However, it is not worth exaggerating the power of Kazakhstan’s influence within the entire industry,” the researcher emphasises.
According to him, the Bitcoin prices primarily fell because of the fall in the global stock market against the background of a possible increase in the Fed’s key rate in the spring.
An October study by the University of Cambridge Business School shows Kazakhstan ranks second among countries where Bitcoin is mined. Its share is 18.1 percent, trailing behind the US, which accounts for 35.4 percent of the global production of the main cryptocurrency. The experts’ report indicated a significant jump in the positions of these countries in the rankings over the year, which, according to assumptions, resulted from restrictions on mining in China.
In September 2019, Chinese companies accounted for 75 percent of all crypto mining, but by the first half of 2021 the figure fell to 46 percent because, on September 24 last year, the People’s Bank of China initiated a total ban on transactions with cryptocurrency in the country.
For Nur-Sultan, the capital of Kazakhstan, the crypto crisis was new. In October, the Kazakh power grid company Kegoc declared that its grids are overwhelmed with the sharp increase in energy consumption by those engaged in digital mining. The practice has also led to an increased accident rate at power plants, while power consumption has overshot generation in the country. The Ministry of Energy, along with Kegoc, later came up with a number of measures to reduce the burden on the country’s power plants.
The limits of possibilities
In practice, Global protests during 2019-2020 have already demonstrated the vulnerability of the cryptocurrency market: technical security was an affected area. For instance, at the height of social unrest in Lebanon, Bitcoin traders massively complained that unknown hackers somehow gained access to their mobile phones and were able to hit a big jackpot. Moreover, hackers had even gained access to the tremendous Lebanese communications operator Touch, which might have played a role in affecting so many
The fact that Bitcoin and related systems are not ready-for-use in force majeure which was also discussed by bitcoiners in Hong Kong when large-scale demonstrations erupted there. Transactions, they lamented, remained too dependent on official telecommunications networks, which were easy for the state to control. An unnamed source in the Hong Kong industry quoted CoinDesk as saying: “People are increasingly simply transferring their money overseas, but it happens from bank to bank.”
CoinDesk’s interlocutors in Iran agree, too, where protests against a backdrop of social dissatisfaction occur with alarming regularity. “In a situation where we don’t have a normal physical connection, none of this damn technology will help you!” as stated in a conversation with a publication of one of the Iranian bitcoiners, commenting on the functioning of the common cryptocurrency system. “We are locked in a prison that the governments of America and Iran have built for us.”
The protests in Kazakhstan affected not only the global value of Bitcoin, but prices for uranium, one of the major natural resources produced by the Central Asian republic. In fact, Kazakhstan accounts for over 40 percent of world uranium production. The spot price for uranium oxide concentrate is up nearly 8 percent this week.