The second exodus: Instability in Kazakhstan may affect the regional Bitcoin mining industry
With protests sparked by economic hardship such as rising fuel prices leading to a full-fledged political crisis, the removal of necessities such as internet and telecommunication may prove lethal to the nascent crypto-mining sector
Following the crackdown on cryptocurrency by the Chinese government on its own soil, many native mining operations relocated to Kazakhstan. The Central Asian nation, having legalized bitcoin mining in 2020 and sitting on massive amounts of natural energy reserves, has proved to possess a strong competitive advantage in the region for the emerging industry and has the potential to be a global centre for Blockchain enterprise in the very near future. This advantage was quickly noticed by miners with 18% of the global Bitcoin network hashrate in August 2021 being sourced from the nation according to the Cambridge Centre for Alternative Finance. This would constitute the second largest regional contribution only being beaten out by the Americas for first place.
Due to the crisis’ nature as a developing issue, it may take time for the true extent of the damage caused to be unveiled. Internet monitor Netblocks revealed that connectivity had been suppressed for over a day as of Friday morning with the hashrate declining by 12% within a mere couple of hours into the shutdown. This could serve as a Perfect Storm situation for Bitcoin prices as a number of unrelated but detrimental issues compound the pressure put on the fragile position Bitcoin currently holds. One of these issues is the US Federal Reserves’ announcement that it may unwind economic stimulus due to the massive spike in inflation with this reducing the allure of more risky assets.
As the uprising burns through the region, miners may find that consistent disruptions to their operations could constitute a second relocation to a region that would allow them to carry out their mining in peace. Mining flourishes in regions that are legislatively progressive in terms of crypto, political stable and possess an abundance of cheap electricity. While this triad may be hard to find, the crucial need for connectivity may come to snuff out the industry before it could grow regionally. This being said, there are indications that the sheer hunger for energy by mining operations in the area was already outpacing the natural resources of the region. With power outages in November leading to the closure of a major crypto mining hub, the next safe haven for miners may need to have the infrastructure to match.
Information sourced from CNN.
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