In an enraged response to dramatic gasoline price rises, violent protesters have flooded into Kazakhstan’s capital. The administration of the Central Asian republic has resigned. Moreover, the government has imposed a state of emergency in the nation’s capital. However, for the rest of the globe, the turbulence has reduced Bitcoin’s hash rate, raising concerns of another “hash crash.”
What is the Bitcoin hash rate?
The hash rate of Bitcoin refers to the amount of computational and processing power given to the network through mining. Bitcoin mining is a critical operation that ensures the network of the digital currency is maintained. Bitcoin mining accomplishes this through the use of a massive worldwide network of mining equipment. Mining equipment means powerful computers built for this task. These robots mine bitcoins by performing difficult mathematical computations that validate Bitcoin transactions.
Each machine must make millions of guesses every second to tackle these challenges. This needs a large amount of electricity. According to the University of Cambridge’s Bitcoin power consumption index, bitcoin miners spend around 129 terawatt-hours of energy, accounting for approximately 0.6 percent of global consumption. And this high-energy mining network is still expanding. However, it takes a lot of energy to keep the blockchain network running.
Kazakhstan’s Internet outage has a significant impact on the hash rate
China banned Bitcoin mining in the region that had accounted for over two-thirds of the blockchain network’s hash power six months ago.
A hash rate is a measure of how much computing power miners produce in a given amount of time. When a significant percentage of its power is withdrawn, the hash rate falls precipitously, and the price tends to follow.
And that is what is happening once again as a result of a large internet outage, which may have been imposed by the country’s leadership to minimise the coverage protesters are presently receiving. Protests have spread to Kazakhstan’s capital, Astana. Consequently, several government buildings, including the president’s residence, have apparently been set on fire.
The turmoil is the result of the government’s withdrawal of fuel price control laws, which has led to gas prices more than doubling since the beginning of the year.
Will Bitcoin’s price fall in lockstep with the network?
While the attention in Kazakhstan is understandably focused on the price of gas and the subsequent demonstrations, cryptocurrency investors may be particularly interested in the issue due to Kazakhstan’s large portion of the Bitcoin hash rate.
The country now contributes around 18% of the network’s hash rate, which has lately achieved new all-time highs. The Bitcoin hash rate began 2021 by establishing new all-time highs, and the price followed suit. When the hash rate fell owing to the China ban, the price fell as well. What will happen next, with a huge outage already underway in Kazakhstan?
Given the magnitude of China’s contributions to the hash rate in comparison to Kazakhstan, it seems certain that the network will recover.
However, Bitcoin price is currently grinding along with a support level that has been consistently tested for more than a month, during some of the most negative emotions in the cryptocurrency market since Black Thursday in 2020.