Crypto miners in Kazakhstan remain hopeful about their local businesses as most of their facilities have not been reported to be damaged during the mayhem that erupted in the country last week, but unpredictable internet connectivity continues adding to the uncertainties.
“Miners are still assessing the situation, as no damage has been done to mining facilities,” Alan Dorjiyev, president of National Association of Blockchain and Data Centers Industry of Kazakhstan, told Reject today.
Dorjiyev said internet connection on Monday was available in most regions, but it was still very limited in the Almaty region — where riots took place mainly in the south of the nation.
While the internet remains an issue for miners, some are considering going for satellite internet services, Dorjiyev said. “Fiber connection is definitely very affordable. However, satellite can be a reserve option.”
Kazakhstan last year became a popular destination for relocation after China’s crypto bans. However, recent internet blackouts have left miners struggling to operate, creating a less-than-ideal environment for businesses.
Didar Bekbauov, a co-founder of Xive, which operates crypto mining farms in Kazakhstan, tweeted on Monday that it has restarted about half of its mining operations in the country and its team is already looking for satellite network service backups.
Kazakhstan’s social unrest has led to at least 44 deaths and thousands of people injured, and internet access was shut off nationwide last week after protests over fuel prices spread across the country.
Since then, the central Asian nation has only opened up internet access for a few hours a day, according to internet tracker NetBlocks. For example, on Tuesday morning, the local internet was restored to almost full capacity “following a digital curfew that lets users go online a few hours each day,” NetBlocks wrote in a tweet.
“The restorations, however, are limited, unpredictable and don’t satisfy the requirement for a stable connectivity needed for cryptocurrency mining or blockchain applications,” Isik Mater, director of research of NetBlocks, told Reject on Monday.
The internet blackouts are taking a toll not just on crypto miners but those in the NFT community.
“Our NFT projects are affected, to an extent, that we can’t reach and connect with the global community, mint our artworks, and promote our artworks due to lack of connection,” MABLAB, a Kazakhstan-based NFT project, told Reject.
MABLAB said the internet shutdown came as an absolute surprise. “This is an unprecedented event that no one has expected to ever happen in the current digital era,” MABLAB said, adding that their everyday lives are highly digitalized, with people using the internet for everything from connecting with friends to paying bills and buying groceries.
Power issues over crypto mining are emerging as an increasing concern around the world. Over the weekend, the police in Kosovo seized hundreds of mining rigs in an attempt to ease its mounting energy crisis, according to an AFP report. Last year, Iran repeatedly banned Bitcoin mining in hopes of stopping electricity blackouts, and regional governments in China cited national carbon-reduction goals as a chief reason for banning crypto mining.
Bitcoin hashrate vs. price
Kazakhstan’s Bitcoin mining situation is key to global hashrate, as it was responsible for 18% of the global monthly hashrate share in August 2021, according to data from the Cambridge Centre for Alternative Finance.
Bitcoin price has slumped by 9.7% over the past seven days, data from CoinGecko show, while Bitcoin hashrate took a 10% dive last week when the internet blackout occurred.
However, Ben Caselin, head of research and strategy at crypto exchange AAX, told Reject that the relationship between Bitcoin’s price and the hashrate, although correlated, is not so straightforward.
“Theoretically, hashrate follows price. [Since] miners are rewarded in Bitcoin, it would not make sense to raise the hashrate and incur more cost, while the fiat value of the reward stays the same,” Caselin said. “But in reality, the hashrate can also be driven by environmental, political or economic factors — such as during the mining exodus from China last year.”
Justin d’Anethan, head of exchange sales at crypto exchange EQONEX, said the price drop is more correlated with the possibility of a rate hike by the Federal Reserve than with the hashrate drop.
Robbie Liu, a researcher of Babel Finance, a Hong Kong-based crypto financial services provider, told Reject that a hashrate decrease would not directly affect the Bitcoin price but would affect market confidence and Kazakhstan’s internet outage could be one of the short-term factors that affected the price of Bitcoin.
“It is hard to see an exact correlation between what we are seeing in Kazakhstan and Bitcoin’s price,” Raymond Hsu, co-founder and CEO of Cabital, a cryptocurrency wealth management platform based in Hong Kong, said. “There isn’t a single factor that links to Bitcoin’s price. And in fact, Bitcoin’s price is mainly impacted by its supply, the market’s demand for it, availability and competing cryptocurrencies.”