Kazakh BTC miners could migrate to the US due to an energy crisis

Blockchain Crypto Market Cryptocurrency
January 7, 2022 by CoinSurges
After China announced a blanket ban on crypto

After China announced a blanket ban on crypto mining, most miners went offline, given that at the time, China was the largest Bitcoin mining hub. The increased regulatory risk of miners operating in China has forced most, if not all, to move to overseas countries. Kazakhstan turned out to be an opportune place for miners escaping the ban in China. Bitcoin mining in Kazakhstan skyrocketed in a short time, and the country now ranks as the second-largest Bitcoin miner. However, the current events in the country hint at the Bitcoin boom being short-lived.

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Bitcoin mining crisis in Kazakhstan

Towards the end of 2021, Kazakhstan could barely sustain the flow of electricity due to an influx in Bitcoin mining activities. The energy crisis was even worse during the winter months, given that electricity consumption over that period was high.

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KEGOC, Kazakhstan’s electricity grid operator, started rationing power during the winter months. Mining facilities faced several blackouts during their peak usage hours, which affected production by a significant margin.

Electricity is not the only problem Bitcoin miners in Kazakhstan are dealing with. Recently, the country was rocked by violent protests that have resulted in internet blackouts. The protests have been attributed to a fuel crisis, and Bitcoin miners have found themselves in the middle.

Internet services were shut down for around 36 hours, which meant that Bitcoin miners went offline. Therefore, despite Kazakhstan having a favourable regulatory climate compared to China, the political risk could once again push miners to the US and other locations.

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Kazakh miners could migrate

Kazakhstan currently accounts for around 18.1% of the Bitcoin network mining hash rate, but this could soon take a dip. Besides the aforementioned issues, miners have been grappling with a cash flow problem. Miners and mining pools are required to sell the mined Bitcoin to offset the high fixed costs of operation. This is because such costs need to be paid in fiat.

Miners derive a significant portion of their revenues from holding the mined Bitcoin and selling at higher values. However, the mechanism of selling to settle expenses could be squeezing out a significant amount of the revenues that could have been earned by these firms.

One of the countries currently looking like a favourable hub for miners is the US. The US is currently the largest Bitcoin mining hub, accounting for a hash rate of around 35.1%, and this is expected to grow. Several factors have triggered a growth in Bitcoin mining in the US. The first is the abundance of renewable and stable energy.

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The migration of more miners into the US could benefit Bitcoin long-term by making the mining operations greener and sustainable.

The price of Bitcoin has been on a downtrend this week, and on Friday, it touched a low of around $41,000. The dip has been attributed to the US Federal Reserve plans to increase interest rates and reduce the level of inflation that currently sits at a forty-year high.

The institution is expected to increase the interest rates within the first quarter of 2022. The announcement caused a dip in the stock market and the crypto market. The correlation between Bitcoin and the stock market has increased significantly over the past year due to growing institutional investments in Bitcoin.

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