Demonstrations Against Rising Fuel Prices, Total Internet Cutoff to Facilitate Brutal Crackdown, and Bitcoin’s Drop in Value – from $ 46,000 to $ 42,000 – Between January 5-7: The Financial World made the connection this week between the protest movement in Kazakhstan and the fall of the most popular cryptocurrency on the planet. Because this Central Asian country, five times the size of France, has recently become one of the largest producers of virtual currency on the planet. To the point of putting the country’s electricity network in difficulty last year.
Kazakhstan, world leader in bitcoin production
At the beginning of January, following this sudden explosion of violence in the country, the production of cryptocurrency was brought to a halt by the total blackout of the Internet and telecommunications across the country: “No Internet, therefore no mining”, on January 5 released on Twitter Didar Bekbau, the co-founder of Xive, a company involved in building cryptocurrency “farms” in Kazakhstan. Cryptocurrency “mining” refers to the performance by computers of extremely complex calculations that allow the production of virtual currency.
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Not necessarily enough to significantly reduce the global production of bitcoins, note several observers, but certainly enough to scare investors, in an already volatile context. The current repression in Kazakhstan – which has already claimed dozens of deaths – has put the spotlight on the recent weight taken by this central Asian republic in the world of virtual currencies.
According to an indicator from the University of Cambridge, Kazakhstan provided in the fall up to 18% of the hashrate (“hash rate”), that is, the global computing power used to mine bitcoins, placing this country in the second place of the largest producers of bitcoins following the United States. Autocratic power but favorable to miners, inexpensive electricity, essential to power very energy-hungry computers and a steppe battered by icy winds, ideal for cooling computers: Kazakhstan was, from the start, an excellent candidate for the making a cryptocurrency.
A struggling Eldorado
But it only turned into El Dorado following the decision, in spring 2021, of neighboring China to completely ban the mining of virtual currencies within its borders. The move sparked a mass exodus, and by the summer, Kazakhstan’s share of global computing power used to mine bitcoin rose from 7% to 18%.
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A short-lived surge, however. Even before the generalized shutdown of the Internet, decided by the Kazakh authorities this week, the context had become less favorable in this former Soviet Republic. In October, the Kazakh company in charge of the local electricity network accused bitcoin miners of being partially responsible for a power cut at Ekibastuz-1, the country’s largest power station. The production of bitcoin consumes too much electricity, plunging the rest of the country into darkness.
A few weeks later, the passage of a new law enabled the operator of the Kazakh power grid to significantly reduce and even, in some cases, completely cut off the power supply to the country’s cryptocurrency farms. Several companies have announced that they have moved their operations to Russia or the United States. “It’s night and day, there is currently no potential for bitcoin mining in Kazakhstan”,assured at the beginning of December, at the Bloomberg agency, Almas Choukine, managing partner of a Kazakh investment firm.
“They made mining a scapegoat, and the miners are now leaving the country”, lamented Didar Bekbau at the same time. The entrepreneur left for the United States in early January.
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