Bitcoin hashrate dips amid Kazakhstan internet shutdown

On January 5, amid ongoing protests across Kazakhstan, there was a complete internet outage, including for wired operators. According to NetBlocks, on January 6 the shutdown continued, which is also confirmed by the local publication Vlast.

Internet is down again in Kazakhstan from early morning. https://t.co/ae0Ys4sl3Z

— Vlastkz (@Vlastkz) January 6, 2022

According to the GlobalCheck project, on Wednesday for most of the country internet did not work for more than five hours. Some wired and mobile providers continued to provide access to the network. In Almaty, wireless connections for most operators remained offline.

According to BTC.com, after a few hours of internet outage in Kazakhstan, Bitcoin’s hashrate fell by about 12%. At the time of writing the total network hashrate is estimated at 179 EH/s, which is higher than the figure on January 4.

Due to the Internet shutdown in Kazakhstan, the hashrate of Bitcoin’s entire network dropped by about 12%. Together with the minutes of the latest meeting of the Federal Reserve, the crypto market has also fallen. pic.twitter.com/ksDIGeiY8b

— BTC.com (@btccom_official) January 6, 2022

Alan Dordzhiev, head of the National Association of Blockchain and Data Center Industry of Kazakhstan, told ForkLog that “mining farms have been shut down for the duration of the internet blockade across the country”.

According to Dordzhiev, internet works only in the capital Nur-Sultan. In the rest of the country there is no access to the network. He also noted that industry players are waiting for the situation to clarify.

Pools hardest hit were 1THash (-82%), OKEx Pool (-46.3%) and KuCoin Pool (-22.7%). Hashrate of Poolin and ViaBTC also declined by 15.8% and 19.2%, respectively.

The situation also affected cryptocurrency exchanges. At the time of writing on Binance P2P the price for 1 BTC in a pair with the Kazakh tenge (KZT) starts from 19 161 257 KZT (~$43 990). On the exchange’s spot market in a pair with the dollar, BTC trades near $42 905. On LocalBitcoins a similar picture — sellers ask from 19 766 363 KZT (~$45 380).

The premium for Bitcoin on peer-to-peer platforms often appears amid sharp political and economic instability — this has been observed in Hong Kong and other countries. It remains unclear whether trades occur at elevated prices, as the Kazakh central bank has temporarily приостановил the work of banks and other financial institutions.

The correlation between hashrate and Bitcoin price remains a subject of debate. Some believe there is a causal link between the two metrics. Others think price movements are always driven by a combination of factors. In any case there are not enough arguments to claim that intraday hashrate fluctuations immediately affect quotes both overall and in the night of January 6.

In 2021, due to the ban on cryptocurrency mining in China, some miners moved their equipment to Kazakhstan. According to the Financial Times, more than 87,000 devices were sent to the country.

Companies opened their own facilities or placed equipment on third-party hosting platforms. For example, pools Poolin and ViaBTC did so. The latter signed a partnership with Enegix as early as 2020.

According to the Cambridge Centre for Alternative Finance, in August 2021 Kazakhstan’s share of Bitcoin’s hashrate reached 18.1%.

Initiatives from equipment makers also indicate growing miner interest in the country. In November, Canaan delivered to the country a batch of 2,000 AvalonMiner ASICs. In December the company signed partnerships with several local enterprises. By the end of 2021, Kazakhstan already hosted about 10,300 devices from Canaan.

In August, Nasdaq-listed The9 through its subsidiary NBTC Limited signed an agreement with Kazakhstan’s LGHSTR on the creation of a joint venture. Earlier it signed an agreement with KazDigital to build a 100 MW data center.

In December 2021 some miners began leaving Kazakhstan due to power issues. Relocation was undertaken by BitFuFu and Xive.

We have already written about how to bypass internet blocks in the article on the shutdown in Belarus.