The Slump in Crypto Mining Undercuts Demand for Graphics Cards

The slump in cryptocurrency prices this year has also led to lower mining activity for bitcoins (^BTCUSD).  The reduced mining activity has taken a toll on the use of graphic cards that have become an essential component of the systems that generate digital coins. 

With the value of cryptocurrencies plummeting, miners see less of a need for expensive computer hardware.  Moreover, the demand may shrink even further as the Ethereum (^ETHUSD) blockchain network shifts to a new method called “proof of stake,” which won’t require the same heavy-duty computer processing. Nvidia (NVDA) and Advanced Micro Devices (AMD) are the biggest makers of these graphics cards used by crypto miners.

A graphics card is a component that fits into a personal computer and converts code into images that can be displayed on a monitor.  It’s outfitted with chips known as graphics processing units (GPUs).  Crypto miners discovered that gaming gear designed to play video games in high resolution could also be harnessed to create new crypto tokens, which led to a surge in demand for the equipment.

An analyst at New Street Research said at the height of the crypto frenzy last year, an Nvidia graphics card with a list price of $1,499 was getting twice that amount on secondary markets and that miners bought $3 billion of graphics cards since the beginning of 2021.  However, with the recent plunge in crypto prices, Nvidia acknowledged that the crypto slowdown had affected demand for some of its products.  Baird says miners bought as much as 35% of consumer graphics cards during the run-up in crypto prices, and many of them are hitting secondary markets now, potentially eating into Nvidia’s sales.

According to data from MarkSight, in the past two months, the price of Nvidia’s GeForce 3050 model GPU chip fell from $1,100 in late April to $793 on EBay.   The prospects for the crypto mining market to stage a comeback soon are unlikely. Instead of using computers to generate Ethereum tokens, the technology is shifting to a bidding process.  New allotments will be given to those who put up some of their existing holdings as collateral, making the use of GPUs to mine Ethereum tokens obsolete.

• Stocks Tumble on Recession and Stagflation Fears
• Stock Indexes Fall on Recession Fears
• Put Options Storm Royal Caribbean Cruises (RCL)
• Stocks Settle Mixed in Choppy Trade