Here’s why the unrest in Kazakhstan is wreaking havoc on crypto and commodity markets

Bitcoin and Kazakhstan flag

  • Kazakhstan shut down the internet across the country after political unrest sparked by rising gas prices.
  • Among the sectors affected by the outage was Bitcoin mining, which took off in the Central Asian country.
  • Other commodities such as uranium and oil were also affected, both of which saw price hikes days after the uprising.
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It has been days since thousands of protesters stormed the streets of Kazakhstan to express their anger over the rise in LPG prices, which means that it has also been days since the internet was shut down across the country, threatening the safety and security of many businesses and residents.

Among the sectors hard hit is bitcoin mining, a booming industry in the Central Asian country.

Kazakhstan last year became the world’s second largest center for bitcoin mining after China imposed restrictions on crypto activities, according to data from the Cambridge Center for Alternative Finance.

Hours after the internet was cut off on Tuesday evening, the bitcoin hash rate dropped 12%, Larry Cermak, vice president of research at The Block, said in a statement. tweet. The hash rate is a key measure of how much computing power is required to support the network and to create new bitcoins.

“It is possible that the blocking of the internet prevented miners from accessing the bitcoin network, resulting in an immediate and sharp decline in the global network,” John Warren, CEO of GEM Mining, a bitcoin mining company, told Insider.

But Warren isn’t too worried. He said that even if it is difficult to predict how events will unfold in Kazakhstan, the Bitcoin network is resilient, as it has been able to recover smoothly from the recent outages.

“I think disruptions like this wouldn’t have much of an impact on her,” he told Insider.

As of Friday evening, the Internet connection in Kazakhstan continued to function steadily for 60 . hour Although it was briefly retrieved in some parts of the country for a few hours to broadcast the televised speech of its president, according to Issac Mater. She is the Director of Research at NetBlocks, a watchdog organization that monitors cyber and internet security globally.

Kazakhstan’s allure for bitcoin miners has a lot to do with the country’s affordable energy supply thanks to abundant coal power, according to Mohamed El Kastawi, co-founder of Tribal Credit, a crypto-focused institutional payment platform.

“This is an important advantage for miners who are competing in a low-margin industry where the higher cost is energy,” Kastawi 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. Marcos Sotiero, an analyst at digital asset broker GlobalBlock, described this chip as a “short-term ghost.”

Moving forward, it remains to be seen what bitcoin miners will do if the situation in Kazakhstan does not change. For Alan Konevsky, chief legal officer at PrimeBlock Ventures, an investment firm focused on digital assets, US bitcoin miners will be affected indirectly in positive ways.

“First, less hashing power in the network means more room for North American miners to increase their stake in the network,” Konevsky told Insider. “Secondly, mining companies are set up in countries like Kazakhstan and Kosovo because the cost of electricity is much cheaper than it is in North America. If mining becomes completely non-starter in these countries, we could see miners relocate rather than stop their operations, which negates the loss of power retail”.

Outside of digital assets, some commodities have risen in the midst of the turmoil. Prices for uranium and crude oil, in particular, have risen amid fears of shrinking production.

Kazakhstan is the world’s largest supplier of uranium, the fuel most used by nuclear plants accounting for about 40% of global production, according to Insider. Uranium prices jumped about 8% on Wednesday, according to commodity pricing agency S&P Platts.

Brent crude futures are also up about 6 percent this week after production cuts at Tengiz, Kazakhstan’s largest oil field, on Thursday due to train disruptions, Reuters reported. The country is a major oil producer, with production of 1.6 million barrels per day, according to Reuters.

President Kassym-Jomart Tokayev said Friday that order has “fundamentally been restored” after one of the most severe political turmoil in the country since it gained independence more than 30 years ago.