This week is a rough one for the crypto world. Bitcoin’s (CCC:BTC-USD) plunge is proving to be a heavy weight on other cryptos and related investments. And while altcoins are facing steep drop-offs, the crypto mining sector is being hit just as hard. And on top of Bitcoin’s issues, the sector is also suffering blows as a result of a situation in Kazakhstan. So what do investors need to know about crypto mining stocks now?
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Last year saw the crypto mining industry forced out onto the street, in a way. The Chinese government enacted a series of bans on crypto exchanges and miners, ultimately banning crypto transactions altogether. With no support from the government, these miners have been migrating elsewhere, setting up shop in nations with more lax regulations. One of the most popular destinations for these miners is Kazakhstan.
This week has complicated that story, though. Political unrest in the country is placing crypto mining in the hot seat. As the New York Times tells it, initially in response to surging fuel costs, protestors have taken to the streets over the future direction of the nation. Russia has sent in troops in response.
As part of this, the government in Kazakhstan shut down internet access on Wednesday. One ramification of this is that crypto miners in the country have been unable to access the Bitcoin network, meaning that they are essentially unable to complete any mining. Observers were quick to point out a resulting decline in the Bitcoin hash rate.
Internet Outages Pressure Crypto Mining Stocks
As the second-largest hub for crypto mining in the world, Kazakhstan plays a crucial role. The news is causing rifts across the industry. In addition to volatility in crypto prices — attributed to hawkish plans from the Federal Reserve — it seems the internet shutdowns are pressuring crypto mining stocks. Hut 8 Mining (NASDAQ:HUT) is down 2%, alongside Riot Blockchain (NASAQ:RIOT) and Bit Digital (NASDAQ:BTBT).
Investors should note there are also catalysts brewing within the U.S. that are adding fuel to the fire. In the coming weeks, Congress will meet to discuss crypto mining. The hearing will address the environmental impact of mining, and could spark regulations. As the only country with a larger share of hash rate than Kazakhstan, the news is putting investors on edge.
If there’s a silver lining to the news for crypto mining stocks, it’s that Kazakhstan’s woes won’t likely have a lasting effect on U.S.-based companies. In fact, it could very well stand to benefit miners based anywhere outside of Kazakhstan; with a significant portion of the mining market share now cut off from the network, there’s less competition for the time being. Not to mention, Kazakhstan is a coal-burning country, much like China. This could be a case for a future crackdown in the nation, especially as more scrutiny is placed on coal.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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