Why Some Cryptobros Are Not Happy with the Kazakhstan Protests

Why Some Cryptobros Are Not Happy with the Kazakhstan Protests

The multifold implications of the bloody protests in Kazakhstan.

What is happening in Kazakhstan

At least 15% of the world’s Bitcoin miners went offline on January 5, 2022, resulting in a drop to below US$43,000 per coin for the first time since September 2021.

This is because Kazakhstan was plunged into civil unrest in early January when protests swept across the country. Demonstrators faced-off security forces as they protested against the Kazakhstan government’s announcement to lift price controls on liquefied petroleum gas, which is what the majority of Kazakhs use for their vehicles. The price of gas doubled overnight, which is painful to Kazakhs, particularly those from the western province of the country, as they are most affected by poverty. The protests have left more than 200 people dead and 4,500 people injured.

While the government later restored price caps on fuel in an attempt to appease the public, the protests began to take on an increasingly political tone, with demonstrators demanding ‌systemic democratic change and challenging the country’s authoritarian regime. 

After requesting the aid of ‌Russian paratroopers to contain the clashes, Kazakh President Kassym-Jomart Tokayev ordered the country’s telecom provider to shut down internet service in an attempt to quell and limit coverage of the escalating anti-government protests. With the internet being cut off, connectivity levels plunged to nearly zero.

Kazakhstan as a crypto mining hub

Hosting 18% of global Bitcoin mining, Kazakhstan is now the second-biggest country for Bitcoin mining after the United States. The country is home to coal mines that provide a cheap and abundant supply of energy, a major incentive for crypto miners to set up shops there. Kazakhstan’s 100-hour internet shutdown resulted in a significant dip in hashrate, an indicator of how healthy a network is, as miners dropped off the network, and is estimated to cost miners around US$20 million.

Many have speculated that the large increase in production of Bitcoin and other cryptocurrencies have contributed to the stress on power grids in the country and the spike in electricity costs. Crypto mining is power-intensive, and at least 8% of the country’s electricity generation goes towards crypto mining. 

However, now that Kazakhstan has turned out to be not the safest or most dependable haven for crypto miners, they would have to find a new home and look elsewhere for stability and opportunity. For now, the U.S. seems like the most risk-free option. But things might change in the future: there has been increasing speculation in the U.S. that its internal regulatory systems could become more aggressive with crypto enforcement and set new rules to oversee volatile cryptocurrency markets. 

Relocation for crypto miners

This is similar to what happened after China banned crypto trading and mining in the country. In September last year, the People’s Bank of China said that “all virtual currency-related business activities are illegal financial activities.” After the announcement, Bitcoin fell 5% to US$42,496.12 and the price of Ether, the second-largest digital currency, dropped 7% to US$2,921.53. China’s ban on cryptocurrency mining has also forced Bitcoin miners to move to neighboring Kazakhstan, Russia and North America. 

Crypto enthusiasts’ concerns

Throughout the Kazakhstan protests, crypto enthusiasts were concerned not so much about the grievances of the Kazakh people or the bloodshed caused by military violence but the market implications of the fall of Bitcoin. Some have even gone so far as to root for the Kazakhstan authorities to put down the civil unrest as soon as possible in order for Bitcoin mining to continue without disruptions. 

What happened in Kazakhstan shows how crypto, despite being motivated by decentralization from central banks and national governments, is still inevitably caught up in geopolitics. Yet, the extent to which geopolitics affects the crypto industry is still unknown. One thing we are sure of, though, is that crypto will have more influence over our daily lives and society, whether or not you have put money into it.

Header image courtesy of Unsplash

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