Bitcoin Plummets By 8% Amid Kazakhstan Internet Shutdown
The world’s leading cryptocurrency lost around 8% in value and tumbled to under $41,000, as investors dumped their crypto coins. The large sell-off was partly spurred on by ongoing events in the Central Asian nation.
Dozens of citizens have died and public buildings across the country have been ransacked and torched in the worst violence experienced by the former Soviet republic during their 30 years of independence.
The upheaval has been fuelled by public anger over the country of 19 million’s former ruler Nursultan Nazarbayev and his family amassing a huge fortune. Citizens are also angry over a hike in gas prices.
Security forces regained control of the streets of Kazakhstan’s main city, Almaty, on Friday morning and the president said constitutional order had mostly been restored after days of clashes in which at least 26 demonstrators were killed and 18 law-enforcement officers died.
It came hours after 2,500 Russian ‘peacekeepers’ from the Russian-led Collective Security Treaty Organisation (CSTO) arrived in Kazakhstan on Thursday at the request of President Kassym-Jomart Tokayev.
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The chaos in the country, which has led to a series of internet blackouts, has had a huge ripple effect on the Bitcoin sector.
Kazakhstan’s national internet connectivity was just five per cent of ordinary levels on Friday. This made mining for Bitcoin impossible.
Bitcoin mining is the process by which ‘miners’ can create new coins to be sold on marketplaces. It is also how new transactions are confirmed by the Bitcoin network.
It works by using sophisticated hardware which contains an extremely complex computational maths problem.
The first computer that solves the puzzle is awarded the next block of bitcoins – and its associated miners are given crypto tokens. The process happens over and over again, producing an ongoing stream of new Bitcoin.
But Bitcoin’s so-called Proof of Work mechanism requires a global network of computers to be running simultaneously when a transaction takes place. This means that mining requires a huge amount of energy.
The energy needed for mining is so large that China expelled its cryptocurrency miners in May 2021 because they were draining energy resources.
The miners found a new home in neighbouring Kazakhstan, where old coal mines have proven a cheap and abundant energy source. However, internet shutdowns have made it difficult for miners to carry on with their operations in the country.
Last year, Kazakhstan accounted for over 18% of the Bitcoin hashrate. This means that almost a 5th of the global power used to create Bitcoin was coming from Kazakhstan. Since the blackouts, it has been reported that 12% of the global hashrate has disappeared.