Bitcoin crashed after Kazakhstan cut off its internet supply to quell violent anti-government protests, hurting crypto miners.
The coveted crypto plunged below $42,000 on Thursday, down from a high of $69,000 in early November last year – throwing investors off.
Experts point out that the decline is linked to Kazakhstan’s cutting off of internet supplies to quell recent violent protests against the government and President Kassym-Jomart Tokayev.
And the Russian “peacekeeping” forces intervened in the financial capital, Almaty, after demonstrations against the recent rise in gas prices turned deadly.
In total, 13 policemen were killed – and the Kazakh government said three officers were left with beheadings.
The recent blackout in Kazakhstan — which is the second-largest center of bitcoin mining after the United States, which accounted for 18 percent of total global bitcoin production capacity in August last year, according to Reuters — has extinguished a fifth of the cryptocurrency network.
With internet access cut off, the number of computers needed for network maintenance has dropped dramatically.
According to Larry Cermak of The Block, the ban led to a 12 percent drop in “hash” — a term used to describe the amount of computing power needed to power the Bitcoin network.
The looming news of an interest rate hike by the US Federal Reserve is also behind the recent decline, according to Sky News.
The minutes of this week’s Federal Reserve meeting indicated a possible interest rate hike in the US soon – causing a drop in the value of a variety of assets from cryptocurrencies to stocks.
Computers are needed to perform complex mathematical calculations to put new bitcoins into online trading.
This process is also known as mining and requires a large amount of energy.
Bitcoin mining is surrounded by controversy due to the huge amount of fossil fuels needed to mine cryptocurrency and the negative impact this has on the environment.
5 Risks of Cryptocurrency Investments
The Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- consumer protection: Certain investments that advertise high returns based on crypto assets may not be subject to regulation other than anti-money laundering requirements.
- price volatility: The high price volatility of crypto assets, combined with the inherent difficulties in reliably valuing crypto assets, puts consumers at high risk of losses.
- Product complexityThe complexity of certain products and services related to crypto-asset groups may make it difficult for consumers to understand the risks. There is no guarantee that crypto assets can be reconverted into cash. Converting crypto assets to cash depends on the supply and demand that exists in the market.
- Fees and feesConsumers should consider the impact of fees and costs on their investment, which may be greater than those of regulated investment products.
- Marketing materials: Companies may overestimate product returns or underestimate the risks involved.
China was once the largest bitcoin mining country until a government crackdown on the practice sent miners fleeing to Kazakhstan, where fossil fuel energy is plentiful and cheap.
Unfortunately for these miners, Kazakhstan is currently going through a period of civil unrest.
Demonstrators have been involved in violent clashes with the country’s security forces since 2 January.
Kazakh President Tokayev reportedly imposed a ban on internet access on January 6.
The cryptocurrency market was a sea of red on Friday morning with a lot of other popular coins crashing.
Ethereum is the second largest cryptocurrency and is down 12%.