Jakub Porzycki / NurPhoto via Getty Images
- Kazakhstan shut down its internet across the country after political unrest sparked by rising gasoline prices.
- Among the sectors affected by the disruption is bitcoin mining, which has taken off in the Central Asian nation.
- Other commodities like uranium and oil were also affected, both seeing price spikes days after the uprising.
- Sign up here for our daily newsletter, 10 things before the opening bell
It has been days since thousands of protesters stormed the streets of Kazakhstan to express their outrage at the rising prices of liquefied petroleum gas, meaning that it has also been days since the internet was shut down across the country, compromising the security of many businesses and residents.
Among the sectors that were hit the hardest was bitcoin mining, a burgeoning industry in the Central Asian nation.
Last year, Kazakhstan became the world’s second-largest center for bitcoin mining after China cracked down on crypto activities, according to data from the Cambridge Center for Alternative Finance.
Hours after the internet was shut down Tuesday night, bitcoin’s hash rate fell 12%, Larry Cermak, vice president of research at The Block, said in a cheep. The hash rate is a key measure of how much computing power is required to support the network and create new bitcoins.
“The internet blackout likely prevented miners from accessing the bitcoin network, causing an immediate and pronounced drop in the global network,” John Warren, CEO of GEM Mining, a bitcoin mining company, told Insider.
But Warren isn’t overly concerned. He said that even if it is difficult to foresee how events in Kazakhstan will unfold, the bitcoin network is resilient and has been able to recover smoothly from recent disruptions.
“I think such disruptions will not have a huge impact,” he told Insider.
As of Friday night, Internet connectivity in Kazakhstan remained stagnant during the Hour 60 despite being briefly restored in some parts of the country for a couple of hours for its president’s televised address to air, according to Isik Mater. She is a research director at NetBlocks, a watchdog organization that monitors cyber and Internet security globally.
Kazakhstan’s appeal to bitcoin miners has a lot to do with the country’s affordable power supply thanks to the abundance of coal power, according to Mohamed Elkasstawi, co-founder of crypto-focused business payment platform Tribal Credit.
“This is a significant advantage for miners competing in a low-margin industry where their highest cost is energy,” Elkasstawi told Insider.
Bitcoin fell to a three-month low on Friday. While the drop in the hash rate is not directly related to the price of the asset, the shutdown of the internet has affected bitcoin’s ability to create more of itself through bitcoin mining. Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, called this slide a “short-term ghost.”
In the future, it remains to be seen what bitcoin miners will do if the situation in Kazakhstan does not change. For Alan Konevsky, Chief Legal Officer of PrimeBlock Ventures, an investment firm focused on digital assets, bitcoin miners in the US will be indirectly affected in a positive way.
“First, less hashing power on the network means more space for miners in North America to increase their share of the network,” Konevsky told Insider. “Second, mining companies established themselves in countries like Kazakhstan and Kosovo because the cost of electricity is much cheaper than in North America. If mining turns out to be a total failure in these countries, we could see the miners relocate. instead of closing operations. ” denying the loss of hashing power. “
Outside of digital assets, some commodities have exploded amid the turmoil. Prices for uranium and crude oil, in particular, soared on fears of a decline in production.
Kazakhstan is the world’s largest supplier of uranium, the fuel most used by nuclear plants that accounts for about 40% of global production, Insider reported. Uranium prices rose about 8% on Wednesday, according to commodities pricing agency S&P Platts.
Brent futures also rose about 6% this week after production at Tengiz, Kazakhstan’s largest oil field, fell on Thursday due to disruption of train lines, Reuters reported. The country is a major oil producer with a production of 1.6 million barrels per day, according to Reuters.
President Kassym-Jomart Tokayev said on Friday that order has been “mainly restored” after one of the most intense political turmoil the country has seen since gaining independence more than 30 years ago.