After Bitcoin Magazine’s YouTube channel was temporarily shut down without prior warning, the livestream’s hosts suggested that mentions of “Kazakhstan” may have been flagged by the platform’s algorithm.
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As the government of Kazakhstan claims the country’s power services are stabilizing, thus the Bitcoin hashrate could be on its way to recovery. However, is the situation stable enough for Bitcoin mining yet? Will it ever be?
A Recap
Just a few days after the Bitcoin hashrate reached an All-Time High, thus recovering from the China ban on crypto mining, another authoritarian crisis hit the bitcoin mining industry in Kazakhstan, taking the hash to drop 15% in 10 days.
The country has been the second-largest bitcoin mining spot (after the U.S.) with 18% of the global BTC hashrate ever since China’s miners were forced to find new locations with cheap energy costs.
Parallel to the crypto market down movement, on Friday 7th the price of BTC dropped to $41,000 while the coin’s mining in Kazakhstan went dark as the government forced a power and internet shutdown to gain control over raising protests, which had turned violent.
The protestors were reportedly voicing their anger toward new high fuel costs.
The news has been reported everywhere without complete certainty of what’s happening. Borders, the internet, and other means of communication were blocked, so the information doesn’t reach the world so easily.
The latest reports had shown that the uprising has been tamed as Russia’s President Putin stood proudly as the military ally who sent paratroopers last week. A demonstration of power through force.
President Kassym-Jomart Tokayev called it “an attempted coup d’etat”, Reuters reported. He alleged that “It became clear that the main goal was to undermine the constitutional order and to seize power.”
Both countries had referred to the uprising as a foreign-backed insurrection, failing to blame someone –or somewhere– in specific.
“Old man out!” was the protestors’ favorite chant referring to the former Nazarbayev who still holds power.
“We are ordinary people. We are not terrorists!!” read a banner from 40 activists.
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Is The Crisis Over?
The government gave “shoot to kill” orders.
In short: no, the real crisis cannot be over. The violence, however, might have stopped.
Reportedly, 164 people (3 children) have been killed, over 2,000 injured, 7,939 were detained.
“The violence has been by far the worst seen in the country since independence from the Soviet Union in 1991.” The Telegraph reported
“One man who had ventured out to find food was shot dead, according to credible reports, and a Kazakh media group said that one of its drivers had been killed.”
It wasn’t simply an internet shutdown: they was no way to buy food, banks were closed in central Almaty, going out was too dangerous, even ambulances were too afraid to work past the 7 pm curfew.
It also wasn’t simply about a rise in fuel prices, as the UK-based newspaper reported, the citizen’s despair also comes from “frustration at economic stagnation, revulsion at elite corruption and anger at the dilapidated state of social services and healthcare despite Kazakhstan’s oil and mineral wealth”.
The National Security Committee of Kazakhstan claimed that the situation has “stabilized and is under control” and declared the date as a day of mourning.
However, others report that the protests enter week 2.
Bitcoin Mining In Kazakhstan
On the miners’ end, the government intends to tighten rules and introduce extra taxes starting this year.
Currently, reports are showing mixed signals about the impact of these events on the industry.
An analysis by CoinDesk using data from mining pool BTC.com alleged that the lost Bitcoin hashrate of top mining pools had been nearly recovered, narrowing the loss to 2.2%.
Data from BTC.com shared by CoinDesk
The portal reported Alan Dordzhiev, head of the Kazakh National Association of Blockchain and Data Center Industry, had told them that the situation had been “almost resolved” and despite the blackouts, crypto mining regions were “totally fine”.
However, internet watchdog NetBlocks reported that a new blackout happened:
And NetBlocks’ director of research of internet monitor Isik Mater told Forkast that restorations made in the country “are limited, unpredictable and don’t satisfy the requirement for a stable connectivity needed for cryptocurrency mining or blockchain applications,”
The current hashrate measured by Blockchain.com reads 176 EH/s, still away from the 208 million EH/s ATH on January 1st –but not endangering.
Kazakhstan miners had been facing power restrictions. They might have already started to set their sight overseas, and beyond the service’s stability, the ongoing situation is unlikely to make them feel safe and welcomed.
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“The Death Of China’s Bitcoin Mining Industry,” 7 Takeaways From The Article
Did China make the mistake of a lifetime by banning Bitcoin mining or do they have a secret plan? That’s the question the whole Bitcoin ecosystem is struggling to answer. And today, we got another piece of the puzzle. In the article titled “It’s Over, It’s All Over” – The Death Of China’s Bitcoin Mining Industry,” a pseudonymous manager by the name of Ye Lang tells his story. And in his tale, a bigger story is reflected.
Related Reading | Bitcoin Hash Rate Goes On Death Spiral Post China’s Crackdown On Miners
On May 21st, in a “meeting of the State Council’s Financial Stability and Development Committee, a top-level economic and financial policymaking body chaired by Vice Premier Liu He,” China decided to ban Bitcoin mining. Less than a month later, on June 19th, the Sichuan government ordered “the closure of Ye’s facility, along with 25 other cryptocurrency mining projects in the province.”
That story started like this:
Ye decided to jump on the Bitcoin mining bandwagon in 2018 when he closed down the majority of his internet café business, mortgaged his apartment in Anqing, Anhui province, borrowed money from relatives and left his wife and daughters to move to Sichuan
What can we learn from Ye’s first-hand experience?
1.- It Only Takes 80 Employees To Manage An 80,000 Bitcoin Miners Operation
At the peak of the facility’s Bitcoin mining operations, Ye was in charge of 80 employees and a total of 80,000 mining machines, with the entire project estimated to be earning more than 90 million yuan ($14 million) during the peak six months when Sichuan’s rivers are glutted and electricity is especially cheap
The numbers are staggering. Evidently, supersizing mining operations offers a huge advantage. Especially in regions with cheap electricity.
2.- Clean An Renewable Energy Didn’t Save Sichuan
The fact that the electricity for crypto mining in Sichuan came from clean hydropower meant that many thought the province would be a safe haven for Bitcoin miners. As pressure on local governments to cut carbon emissions mounts, projects were successfully shuttered in some other provincial-level regions — such as Xinjiang and Inner Mongolia — where the mining was chiefly fueled by coal.
The only thing we can know for sure about the Chinese government’s plan is this: the environment is not on their radar. They’re closing these mining operations for other reasons altogether.
3.- Bitcoin’s Energy Use Is Not The Issue
The fact that the Sichuan crackdown was about to hit, confirms what everyone has known: the “justification” for cracking down bitcoin miners, the cold shoulder on bitcoin by social luminaries (such as Elon Musk) and the use of the ESG bullshit excuse that crypto is “dirty” have always been merely a socially-acceptable smoke screen for a regulatory crackdown on cryptos when they become too big.
Enough said. ZeroHedge nailed it on the head.
It’s also worth noting that Nic Carter also nailed it on the head regarding China’s energy mix when it came to Bitcoin mining.
4.- Individuals Can Still Mine Bitcoin In China
Despite the government’s hardline approach, Ye is determined to carry on: “This industry is extremely volatile. High emotions and stress are involved, but that’s also its appeal. Companies are banned from mining Bitcoin, but individuals aren’t,” Ye said, adding that he plans to turn around his operation by purchasing old equipment and downsizing.
The Chinese government was only worried about industrial-sized private mining operations. The question is why. What are they planning? Nobody seems to have figured that out.
5.- One Owner Mined Between 70 and 80 Bitcoins Per Day
Another character enters the scene, the owner of the mine. We’ll call him Liu Weimin, also a pseudonym.
Liu owned more than 10 Bitcoin mining farms, which industry insiders estimated accounted for one-eighth of the total electricity consumed by all Bitcoin mines in the province.
During peak seasons, Liu said his farms could mine 70 to 80 Bitcoins every day. About 900 Bitcoins are issued each day globally, according to an industry information platform.
Almost 10% of the total daily issuance seems like too much for a single individual. The Bitcoin world scored a huge win with the Chinese ban on Bitcoin mining.
BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
6.- A Industrial-Sized Mine Can Break Even In A Year
“Mining farms are somewhat like conventional crop farms. No matter how the Bitcoin market changes, the mining process remains. Opening such facilities is a relatively stable investment, and I can generally break even in a year,” Liu told Caixin.
There are few businesses in the world that can give you that ROI. At least among the legal ones. Food for thought for the young entrepreneurs out there.
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7.- Bitcoin Mining Used To Be A Respected Business In China
Thanks to the Sichuan government’s mining-friendly policies back then, Liu’s business continued to flourish for the past three years. He quickly made a name for himself, and was a frequent guest at government events and meetings, where he was recognized as one of many model energy consumers who had helped lift locals out of poverty.
From a respected businessman to a social pariah. It would be easy to feel sorry for Liu if he wasn’t on his way to restore his business.
Following the government’s May 21 crackdown announcement, he arranged teams of employees to scout for new venues in North America and Kazakhstan. In mid-June, his company bought an oilfield in Canada that could potentially provide fuel for his Bitcoin mining business.
So, why did China banned Bitcoin mining? We have no idea. We know, however, that their hold over the industry was already waning and that entrepreneurs are selling small hydropower stations. And we have both Ye and Liu’s stories. Is the picture clearer? Are we closer to the real deal?
Featured Image by Лечение Наркомании from Pixabay – Charts by TradingView
