Kazakhstan crackdowns hit crypto miners

The recent shutdown of Kazakhstan’s internet during a deadly uprising has hit the country’s fast-growing cryptocurrency mining industry.

As a result, the global computing power of the bitcoin network dropped sharply.

Tom Wilson, Reuters cryptocurrency correspondent:

“So it's fair to say that cryptocurrencies as a whole are becoming more sensitive to geopolitical factors than previously was the case.''

Last year, Kazakhstan became the world’s second-largest center for bitcoin mining after the U.S.

This was after major hub China clamped down on crypto mining activity.

"As with everything in the cryptocurrency world, bitcoin mining is rather an opaque industry...That said, a report from the University of Cambridge last year showed that in August, Kazakhstan accounted for about 20 percent of bitcoin's global computing power. That's up from about eight percent in April so there's a pretty quick increase in the amount of cryptocurrency miners in Kazakhstan.''

Bitcoin and other cryptocurrencies are created or "mined" by high-powered computers.

In different parts of the world, big data centers compete to solve complex mathematical puzzles in a highly energy-intensive process.

"Last year China, which had been the world's biggest cryptocurrency miner, instigated quite a sweeping crackdown on cryptocurrency mining. And that meant that a lot of mining companies fled China for other countries with cheap electricity. In central Asia, Kazakhstan is one of those places.''

A recent uprising in Kazakhstan began with protests against a New Year’s Day hike in fuel prices.

On January 5th, the internet was shut down across the country.

The move likely prevented Kazakhstan-based miners from accessing the bitcoin network.

''And as the internet was shut off on Wednesday, the global computing power of bitcoin slumped pretty dramatically. That in theory makes it easier for miners to produce bitcoin, and it might lead in the future to more bitcoin coming to the market, and that in theory would create downward pressure on bitcoin prices.''

Bitcoin on January 7th slumped as much as 5% to its lowest since late September, tumbling under $41,000 amidst a broader sell-off for cryptocurrencies.

Security forces appeared to have reclaimed the streets of Almaty, Kazakhstan’s main city, after days of violence.

"And it's still actually quite unclear exactly the extent to which geopolitical factors really feed into this, but we can see from what's happened in Kazakhstan recently and also with the wider crackdown on cryptocurrencies by China last year, that the attitude of governments and financial regulators towards cryptocurrencies can really impact on cryptocurrency markets.''

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