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- Kazakhstan reveals the dangerous dependence on bitcoin
- What happened in Kazakhstan, and what is the international community doing for it?
- Market Share of Bitcoin Network:
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In the wake of the Kazakhstan riots, the Government shut down the country’s Internet. Why has this impacted the international crypto market? If you want to start bitcoin trading check the key drivers of bitcoin.
Kazakhstan is in a state of emergency: for days, people have been taking to the streets across the Eurasian country to protest against the Government and rising fuel prices at gas stations. But unfortunately, the military used violence against the demonstrators, thousands of people were injured, and a few dozen were even killed. Now President Qassim-Jomart Tokayev gave the police the order to shoot at protests. Because of these protests and instability, the condition of Kazakhstan is getting more alarming.
In the protests, the state telecommunications company shut down the Internet in virtually the entire country – presumably to prevent reporting on the unrest. And this has severe consequences for the crypto market, far beyond the borders of Kazakhstan, because the country has evolved into one of the most critical locations for global bitcoin mining.
Mining (also called digging) is the digital generation of cryptocurrencies. The process requires computing power to process the transactions on the blockchain and make them available securely and decentrally for all network users. You need stable Internet for that.
Kazakhstan reveals the dangerous dependence on bitcoin
According to estimates, the hash rate fell by a good 12 percent due to the riots. The hash rate is the value that indicates the Bitcoin network’s computing power. The complexity of a process is determined by the level of computing power that is obtainable. The hash rate has recovered somewhat but is still below the pre-riot level.
Kazakhstan is essential for bitcoin mining. The University of Cambridge estimated that about 18 percent of all digital coins of the oldest and best-known cryptocurrency were mined. This data puts Kazakhstan in second place for crypto mining. The USA dominates the mining business with a share of a good third.
Bitcoin has a deflationary character. The amount of digital coins is limited to almost 21 million. About 18.9 million coins have been mined so far. Because the amount of Bitcoin is finite, crypto investors give it value. Following this logic, the Bitcoin price should rise if the production of new coins falters. After all, that makes bitcoin rarer.
However, the opposite is shown: production and Bitcoin prices are falling. This decline could be due to investors being more politically aware. They get nervous and sell their shares. The promise of a value-enhancing limitation is this called into question. The same picture emerged when China’s mining ban curbed bitcoin production. The Bitcoin price also fell parallel to the hash rate. However, there is no causality.
What happened in Kazakhstan, and what is the international community doing for it?
In Kazakhstan, outrage over increased gas prices turned into anti-government protests, the Government was banished, and the military interfered. The concern is also extending to the world.
“It is essential that the situation calms down quickly to avert more violence, disrupting Kazakhstan as a business and investment place,” said the Committee on Eastern European Economic Relations.
Kazakhstan’s commitments under the OSCE to respect fundamental freedoms include respecting free access to information, freedom of the press, and freedom of assembly.
The unrest in Kazakhstan reveals the dangerous dependency of bitcoin on individual states. Several times, it has already been shown how strong the concentration of Bitcoin production in individual regions can substantially impact prices, at least temporarily.
China was the mining hotspot of the crypto scene. However, the People’s Republic banned prospecting in the summer because the energy consumption was too high. Mining is very energy-intensive. As a result, the price collapsed sharply, and Bitcoin struggled with the $30,000 mark from then on. The Chinese mining ban was the trigger for the mining boom in Kazakhstan. The miners were looking for new locations.
Market Share of Bitcoin Network:
Research from the University of Cambridge shows that most of the Bitcoin network’s computing power now comes from the United States. After the ban on mining in China earlier this year, many miners have moved to the US. Although it concerns about 35% of the global hash rate, states such as Texas and Wyoming are leading the way in adopting bitcoin mining. Russia and Kazakhstan are also popular alternatives for miners.
The nation presently accounts for 35.4% of the hash rate. Followed by Kazakhstan and Russia with market shares of 18.1% and 11%
In April earlier this year, the United States’ market share was only 16.8% of the global hash rate. It means that the share has improved by 105%. After China introduced a ban on bitcoin mining, the hash rate plummeted, and the mining equipment market was flooded. This allowed countries and entrepreneurs to enter the mining industry more efficiently. States such as Texas, Wyoming, and Miami are popular destinations due to favorable policies. Kazakhstan and Russia also took advantage of the opportunity, increasing their market share by 120% and 61%.
The government ban on bitcoin mining in China resulted in a 38% drop in the global hash rate. This is in line with China’s estimated market share before the ban and suggests that miners stopped simultaneously,” said Michel Rauchs, digital assets manager at Cambridge Center for Alternative Finance.
Bitcoin is increasingly discussed in US politics. For example, the governor of Texas promises to make the state the ‘number 1 bitcoin state’. And Texan Senator Ted Cruz thinks bitcoin could bolster energy infrastructure. They are not the only pro-bitcoin politicians, by the way. Miami mayor Francis Suarez wants to pay officials in bitcoin. Senate member Cynthia Lummis recently even bought at least $50,000 worth of bitcoin and even thanked God for the existence of decentralized money. Furthermore, the head of the Federal Reserve, Jerome Powell, has announced that they have no intention of banning bitcoin. Finally, there are many rumors about a possible approval of a bitcoin ETF, an index fund that makes bitcoin accessible to institutional investors.
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