Rising energy prices for the general public led to huge protests and civil unrest in Kazakhstan. In a bid to reduce social tensions, Kazakhtelekom restricted internet access on 5 January, leading to a decline in the number of connections to 2% by midday.
The lack of a stable internet connection hit miners hard, with the Bitcoin network's capacity falling by 13.4% to 177 exahash/second.
Last year, Kazakhstan moved up to second place in terms of Bitcoin mining following Chinese regulators' ban on any transactions involving cryptocurrencies and their classification of all coin mining activities as undesirable. The lion's share of Chinese farms moved operations to Kazakhstan due to its proximity, low electricity costs, and loyal support for mining.
Beyond the temporary shutdown of the second-largest player in the mining market, the Fed's decision to accelerate its monetary tightening continues to weigh on BTC. On 5 January, the minutes from the Fed's latest meeting were published. They confirmed that the regulator expects to raise its key interest rates three times in 2022, while also potentially reducing its balance sheet. If taken, these measures could restrict inflation growth and lead to long-term strengthening of the dollar.
However, Galaxy Digital chief Mike Novogratz believes that the $38,000-$42,000 range is a key support for Bitcoin. Institutional investors have been expecting a correction since November 2021 and are ready to mobilise to buy crypto. The fear and greed index, which has dropped to lows unseen since the summer of 2021, would seem to corroborate this point of view.
The internet switch-off in Kazakhstan will most likely be temporary, and the situation should normalise in the near future. As for the Fed, inflation is currently outstripping both the regulator's forecasts and target levels. And this is a compelling reason to buy Bitcoin, an asset that most analytics agencies see as a preferred insurance policy against price growth for major investors.
StormGain analytics group
(cryptocurrency trading, exchange and storage platform)
