Bitcoin Plunges After Shutdown in Kazakhstan — Is the Crypto Too Vulnerable to Political Forces?
Bitcoin investors got another reminder of the cryptocurrency’s vulnerability this week, as its value tumbled to its lowest point in months after chaos in Kazakhstan shut down Bitcoin’s second-largest mining hub.
Bitcoin’s price early Friday fell below $42,000 for the first time since late September, CNET reported, continuing a decline of more than 12% in the past seven days. It’s not the only crypto to shed value. Ethereum dropped below $3,200 Friday morning after trading above $4,000 for much of December.
But while other cryptocurrencies have suffered from uncertainty surrounding everything from interest rates to the Omicron variant, part of Bitcoin’s tumble could be traced to something else: deadly protests in Kazakhstan, which trails only the United States in the mining of the crypto.
Anger over fuel shortages in Kazakhstan has led to massive instability in the central Asian nation — so much so that Kazakh President Kassym-Jomart Tokayev sacked the country’s government and asked Russian paratroopers to help out, CNBC reported.
He also ordered Kazakhstan’s telecom provider to stop internet service on Thursday — a move that sent an estimated 15% of the world’s bitcoin miners offline, CNBC said, citing comments from Kevin Zhang of digital currency company Foundry.
The situation in Kazakhstan comes only a few months after China banned cryptocurrency mining and all crypto transactions within its borders, though that decision might have been nothing more than a way for China to expand its own government-sponsored digital currency, the digital yuan.
Many Bitcoin miners moved their operations to Kazakhstan following the China ban, and once again find themselves surrounded by uncertainty due to political forces.
Internet service was later restored to Kazakhstan. The question now is how much confidence Bitcoin miners have in the country’s stability, and where they will go next if the chaos continues. Some experts say the U.S. might soon see a new wave of crypto miners looking for a safer haven.
Meanwhile, miners face yet another challenge they didn’t foresee even a few weeks ago.
“What’s concerning is that previous congestion and bottlenecks around hosting capacity will be squeezed that much tighter,” Zhang told CNBC. “There’s a tremendous amount of pressure and demand for hosting capacity.”
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