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The Bitcoin price has dropped more than 10% in recent days, amid widespread protests that have rocked Kazakhstan, one of the world’s top crypto mining hubs.
Bitcoin traded around $42,000 on Friday (January 7), down from $48,000 at the end of 2021, according to CoinDesk.
The new Bitcoin was introduced into circulation as a reward for miners for solving complex math problems. After the Kazakh government ordered a leading telecommunications provider to cut off the internet across the country, the hash rate fell.
The internet access is cut off in response to sharp protests over high liquefied petroleum gas (LPG) prices. This is the fuel used by many motorists in Kazakhstan. Internet access is essential to Bitcoin mining and trading. The January 6 hash rate is down 15% from the beginning of the year.
After China and another leading crypto hub banned energy-intensive mining activities, many crypto miners have moved to Kazakhstan to take advantage of cheap electricity.
As of August 2021, Kazakhstan accounts for 18% of the global hash rate, according to the UK’s Cambridge Center for Alternative Finance.
A prolonged internet outage could force Bitcoin miners in Kazakhstan to shut down or move elsewhere. But losing internet connection is not the only problem crypto miners in Kazakhstan face.
Although the main cause of the ongoing protests is the price of LPG, demand for electricity in the country is also outstripping supply for some time. This leads to sudden or intermittent power cuts. Some argue that energy-intensive mining operations are responsible for the current turmoil.
Market analyst Yuya Hasegawa of Tokyo-based crypto exchange Bitbank said that miners may be transferring Bitcoins from storage accounts to trading accounts so they can lock in profits. 5,000 Bitcoins were traded through accounts held by miners.
The situation in Kazakhstan shows how high the geopolitical risks affect Bitcoin, even though the virtual currency is not issued or backed by a single government.
Political and social factors are expected to play more roles in the crypto market. El Salvador recently became the first country to legalize Bitcoin. Meanwhile, Russia and Iran are doubling down on Bitcoin mining as a way to earn foreign currency.
According to Nikkei Asia
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