Inflation causes demonstrations in Kazakhstan, the government shuts down the internet, and bitcoin falls.

Kazakhstan, a country that borders Russia and China, is witnessing violent demonstrations this week; there are reports that dozens of protesters and police lost their lives. The reason for these riots is rising inflation, mainly the increase in LPG gas prices, the primary fuel in the country.

As a way of trying to contain the rallies that have lasted for four days, the government stopped internet services in the country. As a side effect, Bitcoin is estimated to have lost 18% of its mining computational power, or hash rate. According to Fortune, Kazakhstan was hosting 18% of global bitcoin mining as of August.

Inflation

The situation in Kazakhstan was initiated by the rise in the price of LPG gas, the increase in LPG gas will cause an upsurge in transportation costs that will be reflected in all kinds of consumer goods.

As a result, the protests quickly grew more prominent, showing the people’s discontent with a government that led 29 years, between 1990 and 2019, by Nursultan Nazarbaev. Despite his departure, it is clear that he still has a lot of influence over the current President of Kazakhstan, Kassym-Jomart Tokayev.

Kazakhstan is experiencing some violent demonstrations, a kind of civil war. As a result, dozens of dead and thousands of people got injured. As a way of trying to reduce the spread of such demonstrations, the Kazakh government turned off the internet in the country. Consequently, local miners were affected as the BTC mining activity depends on the internet.

Rising Electricity Concerns

Although it is impossible to estimate a precise number of the drop in the Bitcoin hash rate, it is worth noting that after the ban on mining in China, Kazakhstan was one of the countries that harbored most miners, possibly due to its geographic aspects. Besides Kazakhstan, the USA and Russia were other countries that saw the arrival of miners from China.

Kazakhstan bitcoin mining dramatically surged into third place on the global market as the country’s share reached 18 percent of Global BTC mining, reported by Cambridge Centre for Alternative Finance, which caused some grave electricity problems.

In 2021, the electricity use in Kazakhstan reached 82.99 billion kWh. The Kazakhstan Energy Ministry attributed this high consumption to Bitcoin mining data centers in the country. According to the ministry’s calculations, it is necessary to build additional energy sources of at least 1000 MW to provide mining farms with sufficient electricity. In early October, the Ministry of Energy presented a draft order limiting the power consumption of one mining farm to 1 MW. and the total capacity of farms in the country to 100 MW.

To buy Russian electricity. Recently, the Director of the Electricity Development Department of Kazakhstan, Aidos Daribayev, said that the state-owned energy firm Samruk-Energo began negotiations with Russian Energy giant Inter RAO to establish a joint partnership. Aidos Daribayev further noted that the country’s energy consumption increased by 8% during the first ten months of the year 2021, While in previous years, the growth rate was between 1 to 2% per year.

Impact On Bitcoin Price

Along with Kazakhstan mining issues, The Bitcoin market sell-off was triggered after the U.S. Federal Reserve indicated that an interest rate hike could occur in March rather than the usual time frame.

Bitcoin has fallen below $42K while Ethereum is trading below $3300. The fresh rally of downfall has caused some severe trading positions liquidations; crypto liquidation reached $102 million in just half an hour, $40 million in BTC, and $42 million in ETH. If the King crypto cannot hold the physiological support of $40K, we might see more intense bleeding.

The fall in bitcoin prices has led to a sharp decline in altcoin markets. More than 200,000 traders got liquidated in the last 24 hours. More than 87% of the $800 million in liquidation in the past 24 hours was in long positions. Cryptocurrency exchange OKEx liquidated $241 million, the highest among major exchanges, while traders on Binance suffered losses of $236 million.

Eric Adams, the current Mayor of New York (NY) city, spoke with CNBC this Thursday and took the opportunity to answer questions about Bitcoin (BTC).

When asked about the recent crash of Bitcoin, the Mayor said that sometimes this is the best time to buy.

Elected as 110th Mayor of New York City in November 2021, after being elected Adams announced for the first time that he would receive his first three salaries in Bitcoin in Nov. According to the Mayor, having started his term on January 1st, he has not yet received his first paycheck.

In an interview this Thursday, Eric Adams reaffirmed his enthusiasm for blockchain technology and the use of Bitcoin. Far beyond receiving his salary at BTC, the NY mayor also wants schools to teach about cryptocurrencies.

The show’s host, Andrew Sorkin, questioned whether the Mayor had already received his first salary in BTC and asked for his remarks on falling bitcoin prices; the Mayor said that he hasn’t received his first paycheck yet but assured hir first paycheck would be in BTC, also claimed that it the best time to buy BTC when it falls.

“Sometimes the best time to buy is when things go down…I’m going to take my first three paychecks in bitcoin. I haven’t received my first check yet.”

"Sometimes the best time to buy is when things go down," says @NYCMayor on #bitcoin. "I'm going to take my first three paychecks in #bitcoin. I haven't received my first check yet." pic.twitter.com/dqGkVYxOKg

— Squawk Box (@SquawkCNBC) January 6, 2022

The NY mayor recalled that he has only been in office for five days and that he is still willing to receive his first three salaries in BTC. Finally, he reaffirms his desire for New York to be the center of technologies like Bitcoin.

While bitcoin is a better form of money than fiat currencies such as the dollar, its short-term volatility can scare anyone who wants to earn their salary in Bitcoin.

The Crypto market has already lost $200 billion in just six days after the start of 2022.

Main two reasons that caused the market fall are:

• U.S. Federal Reserve indicated that an interest rate hike could occur in March rather than the usual time frame. U.S. traditional markets also suffered. The shares of Nivida, AMD, and Adobe were down above 5%, S&P 500 and Dow Jones Industrial Average also closed in the red. Nasdaq pulled back 3.34%.
• The other reason is that Bitcoin faces mining problems from Iran and Kazakhstan. In Kazakhstan, wide protests are erupting because of the electricity shortage. The government has shut down the internet nationwide to stop the unrest that has forced local miners to stop mining activities. At the same time, Iran has stopped mining operations due to the winter season.

Larry Cermak, VP of research at the block, said: “Internet has been down in Kazahstan for a few hours where roughly 18% if Bitcoin’s hash rate is.”

Internet has been down in Kazahstan for a few hours where roughly 18% if Bitcoin's hashrate is.

Looks like the impact on the hashrate is so far 12% drop just in the last few hours since internet went down. pic.twitter.com/FcTDsJ6R77

— Larry Cermak (@lawmaster) January 5, 2022

The bitcoin market has already lost $105 billion in the first six days of 2022, while the overall crypto market has lost $200B today. It is unclear whether the factors are only Kazakhstan mining and the Fed’s positioning, but the market continues to watch closely.

With Bitcoin’s price at $42,800, this turns out to be the currency’s most significant drop since December 3, 2021. In the past 24 hours, the crypto market liquidated more than $800M positions and 208760 traders. BTC, ETH, SOL, BNB. ADA, DOGE, SHIB all went down more than 10%. BTC traders lost $317M worth of trading positions while ETH traders lost $163M. Other than BTC and ETH, SOL got the biggest hit with $18.9M worth of trading positions liquidated in the past 24 hours. The data also reveals that in the past 24 hours, $637.68 million worth of leveraged longs positions got liquidated as Bitcoin fell below $43K.

One of the analysts with more than 400,000 Twitter followers who predicted Bitcoin’s bearish move was Crypto Kaleo. According to him, the market is leaning downwards after a long consolidation.

“I’m starting to lean bearish. It just doesn’t feel right that we’ve been consolidating in this range for so long without being able to reclaim any significant levels higher.”

I'm starting to lean bearish.

Just doesn't feel right that we've been consolidating in this range for so long without being able to reclaim any significant levels higher.

— K A L E O (@CryptoKaleo) January 5, 2022

The situation with the mid-cap altcoins is worse, Tezos is down 16%, SushiSwap (-18%), Axie Infinity (-17%), etc. Finally, the accumulative Crypto market cap lost roughly $200 billion in a day and is just hanging above $2 trillion.