Bitcoin is still shaking from its slumping start to 2022 — a new year's flop that was surprising even by the ever-unpredictable standards of cryptocurrency. Due to its inherently decentralized nature, it’s impossible to attribute any changes in the price of Bitcoin to a single cause. However, it does appear that the slump seen in the first week of January is likely linked to some big political shake-ups occurring in the wider world.
Firstly, Kazakhstan flared up with violent unrest. Combined with anger about economic inequality and rising dissatisfaction with the government, thousands of citizens of the Central Asian country took to the streets to protest against the sharp increase in fuel prices seen after the government lifted a price cap on January 1, 2022. In a bid to contain the protests, the Kazak government triggered a near-total Internet blackout, taking the country's fast-growing cryptocurrency mining industry offline.
Kazakhstan’s Bitcoin mining industry has shot up over the past year. After China outlawed Bitcoin mining in 2021, Kazakhstan rose to become the second-largest Bitcoin mining nation after the US, accounting for almost 22 percent of the world’s total mining, as of August 2021. When Kazakhstan’s internet was cut, its capacity to mine significantly dropped and Bitcoin’s computational power sank. In turn, uncertainty was sown and the markets drooped.
Crypto mining is the computing process used to create new coins and maintain the log of all the ongoing transactions. To perform this task, powerful computers must solve highly complex algorithmic puzzles, which requires an eye-watering amount of energy — and an Internet connection.
Over in Europe, another piece of news rocked the cryptocurrency markets. Kosovo, another significant mining hub, took the decision to ban cryptocurrency mining with the hopes of curbing electricity use. The country is currently in an energy crisis, forcing the government to import electricity at high prices and enforcing rolling blackouts. To try to ease the problem, the government also took aim at the energy-intensive mining industry.
“The Kosovo Police has organized an action to discover and confiscate equipment for minimum cryptocurrencies,” Interior Minister Xhelal Svecla announced on Facebook. “272 of these kinds of equipment were seized and one person was arrested. All the action took place and ended without incidents.”
Of course, there’s no certainty in how the rest of the year will play out, both politically and in terms of cryptocurrency. Seeing as a single Elon Musk tweet can make the price of a meme coin skyrocket overnight, we won’t be placing any bets.