Kazakhstan bitcoin mining shuts down amid fatal protests

As the Central Asian nation of Kazakhstan plunged into chaos this week, an internet shutdown hit the world’s second-biggest bitcoin mining hub, in yet another blow to miners searching for a permanent and stable home.

Less than a year ago, China banished all of its cryptocurrency miners, many of whom sought refuge in neighboring Kazakhstan. But months after these crypto migrants set up shop, protests over surging fuel prices have morphed into the worst unrest the country has seen in decades, leaving crypto miners caught in the middle.

After sacking his government and requesting the aid of Russian paratroopers to contain the fatal violence, president Kazakh President Kassym-Jomart Tokayev ordered the nation’s telecom provider to shutter internet service. That shutdown took an estimated 15% of the world’s bitcoin miners offline, according to Kevin Zhang of digital currency company Foundry, which helped bring over $400 million of mining equipment into North America.

As Kazakh miner Didar Bekbau put it, “No internet, so no mining.”

Bitcoin dropped below $43,000 for the first time since September in trade on Thursday, falling over 8% at one point. The price move followed the release of hawkish minutes from the Federal Reserve’s December meeting. Castle Island Ventures’ Nic Carter thinks the supply delta from changing the pace of mining is minimal and that the falling price of bitcoin is more a function of the Fed and “general risk-off behavior.”

Internet service was briefly restored in the country, but data from monitoring group NetBlocks Internet Observatory shows that connectivity levels continue to flatline at just 5% of ordinary levels across the country.

“It’s now Friday morning in Kazakhstan where internet has been shut down for some 36 hours, placing public safety at risk and leaving friends and family cut off,” NetBlocks wrote in a tweet.

The entire episode lays bare two significant facts about the state of the bitcoin mining industry. For one, the bitcoin network is resilient to the point that it doesn’t skip a beat, even when a substantial portion of miners are unexpectedly taken offline. Second, the U.S. may soon see a fresh influx of crypto miners looking to avoid future disruptions.

The question now is whether the U.S., which eclipsed China as the planet’s largest bitcoin mining hub in 2021, has the room to take in any more miners.

“What’s concerning is that previous congestion and bottlenecks around hosting capacity (readily available space to plug machines into) will be squeezed that much tighter,” explained Zhang.

“There’s a tremendous amount of pressure and demand for hosting capacity,” he said.