Not only that, digital token numero uno is down nearly 13 percent from its recent highs, following the political turmoil in Kazakhstan, which is the second largest bitcoin miner.
Low energy prices in the country have attracted global entities to set up a bitcoin mining store. Electricity costs in Kazakhstan on average just $0.055 per kilowatt-hour for companies, compared to $0.12 per kilowatt-hour paid by US companies.
The sharp rise in fuel prices led to a popular protest that forced the cabinet to step down, before internet services were shut down across the countries, and the Bitcoin hash rate fell by 13.4 percent.
Trade bureau WazirX said that after China banned bitcoin mining in early 2021, the market took a huge hit and some miners migrated to other countries such as Kazakhstan due to favorable factors such as abundant energy.
“Due to protests in Kazakhstan, the government shut down the internet in the state, which hit bitcoin miners hard and the hash rate fell by 13.4 percent, one of the factors responsible for the recent bitcoin decline,” she adds.
This event exposed miners to political risks and looked to countries with political stability. The miners have moved to Kazakhstan with old equipment and plan to move to other locations once the equipment becomes obsolete.
The total market capitalization of Bitcoin has crossed the levels of 800 million dollars with its trading volume losing about 30 percent in the last day.
Vikram Suburaj, co-founder and CEO of Giottus Cryptocurrency Exchange, said there was a general expectation of a strong Bitcoin price rally in Q4 2021 which did not happen.
“Big market players reacted to disappointment by locking up their profits and thus securing a sale, eroding a significant portion of the cryptocurrency’s market capitalization.” he added.
However, Kazakhstan is not the only pain point for bitcoin holders, as the cryptocurrency giant has lost about 42 percent of its value from peak levels of $68,790 in late November 2021.
Moreover, there are more factors adding to the cryptocurrency’s problems as the sharp drop cannot be attributed to just one factor.
Edul Patel, CEO and co-founder of Mudrex, said that the political instability in Kazakhstan is definitely one of the points adding to the bitcoin decline as the country was the world’s second largest bitcoin mining hub after the United States.
“Other reasons would be aggressive Federal Reserve policy, inflation, fear of regulations, uncertainty about the new Covid variant, and major fraud in Pakistan,” he added.
Bitcoin is an asset that is traded as a proxy for liquidity conditions. With liquidity dwindling, macro players in the fray are now selling bitcoin, and all other cryptocurrencies are following the group.
Alex Krueger, founder of Aike Capital, a US-based asset management firm, said in a tweet that bitcoin could end up falling as low as $30,000 if US inflation data to be released on Wednesday comes in higher than expected.
Bitcoin’s dominance of the crypto wagon has breached 40 percent, giving bears the upper hand. The decline in net transaction volumes also helped weaken the cryptocurrency.
Investors are worried about an imminent increase in interest rates due to rising inflation in the economy. They are naturally moving their investments to safer and less volatile assets, Supraj from Giotos added.