It was a dramatic week for bitcoin and the wider cryptocurrency market.
Bitcoin fell to a more than three-month low, in part due to broader weakness in markets after minutes released by the US Federal Reserve sparked a sell-off, but also because Kazakhstan, a prominent player in the cryptocurrency mining world, shut down the country’s internet.
Here are the top stories that caught our eye.
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Bitcoin falls to its lowest in more than three months
Bitcoin fell to its lowest in more than three-months today, bottoming at just above $41,000, after the prospect of tighter monetary policy weighed on the cryptocurrency.
The minutes from the Fed’s December meeting released on Wednesday indicated that the world’s most powerful central bank is getting increasingly worried about higher levels of inflation – and interest rates could rise more quickly than expected.
Market watchers fear that the faster-than-expected interest rate hikes would reduce liquidity in several asset classes, including cryptocurrencies.
Kazakhstan’s internet shutdown is bad news for bitcoin mining
Bitcoin also came under pressure this week because of violent clashes in Kazakhstan between the army, police and protestors.
The crisis which began at the weekend, prompted by rising fuel prices, has erupted across the country in recent days.
As a result, Kazakhstan shut down the internet on Wednesday. The move which was initially intended to thwart protestors’ communications, has reverberated across the cryptocurrency market.
Kazakhstan is a key player in bitcoin mining - the process by which new cryptocurrencies units are minted and created. Last year, it became the world’s second-biggest centre for bitcoin mining, says the Cambridge Centre for Alternative Finance.
Kazakhstan lags behind only the US in terms of biggest crypto mining centres in the world. As of August last year, it accounted for 18% of the world’s global bitcoin mining, says Fortune.
Last year, China took a range of aggressive measures aimed at curbing cryptocurrencies, including banning cryptocurrency mining, a move that surprised many as the country had accounted for 65% of the world’s mining.
Kosovo bans cryptocurrency mining amid energy crisis
As well as the disruption in Kazakhstan, Kosovo banned crypto mining on Tuesday in an effort to reduce electricity consumption. The country is enduring its worst energy crisis in a decade.
Energy prices are rising fast in Europe for numerous reasons, including reduced supply from Russia and unprecedented demand for natural gas.
On top of this, Kosovo’s state largest coal fired power plant was forced to shut down last month because of a technical issue. This has prompted the government to import electricity at very high prices.
Cryptocurrency crime reaches its highest level in 2021
Crime using cryptocurrencies took place at its highest level last year, hitting an all-time high of $14bn in 2021, research by blockchain company Chainlysis said in a report this week.
Chainlysis said losses generated from illegal cryptocurrency activities was 79% higher than the previous year.
Scamming and theft were the two biggest forms of cryptocurrency crimes.
The blockchain company said decentralised finance (deFi), a booming sector of the cryptocurrency market which aims to eliminate third parties such as banks, played a key role in fostering greater cryptocurrency crime.
“DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike,” the report says. “But DeFi is unlikely to realise its full potential if the same decentralisation that makes it so dynamic also allows for widespread scamming and theft,” Chainalysis said.
Here’s what happened to five of the largest cryptocurrencies by market cap – according to data compiled by Coinmarketcap – in the last seven days:
- Bitcoin fell 11.8% to $42,405.
- Ether fell 14.2% to $3,253.
- Tether was flat at $1.
- Binance Coin fell 12.9% to $456.
- Solana fell 19.4% to $142.
What you need to watch out for
GameStop, the video game retailer which was at the fore of the “meme stock” trading frenzy last year, is reportedly launching a division to create a marketplace for non-fungible-tokens (NFTs) and to build cryptocurrency partnerships, the Wall Street Journal reported on Thursday.
Saloni is a web writer for MoneyWeek focusing on personal finance and global financial markets. Her work has appeared in FTAdviser (part of the Financial Times), Business Insider and City A.M, among other publications. She holds a masters in international journalism from City, University of London.
Follow her on Twitter at @sardana_saloni
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