Cryptocurrency GPU mining bubble might burst: What are the consequences?


Cryptocurrency GPU mining is becoming a bubble these days. With so many users wanting to mine some of top 10 cryptocurrencies, the bubble can burst!

23 June, AtoZForex Have you encountered a problem finding a video card for cryptocurrency mining? This might be one of the effects of the recent cryptocurrency GPU mining popularity spike. More and more users are switching to video and graphics cards instead of CPUs for mining cryptocurrencies.

Cryptocurrency miners switch to GPU

As I have discussed in my previous article about video cards for Bitcoin mining, many hardware producers now are feeling the effect of the surge in demand for video cards and graphics cards.

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Previously, Bitcoin miners used mainly central processing units (CPUs) for mining process. However, these days, modern Bitcoin miners prefer using video cards. They claim that using graphics and video cards for Bitcoin mining is more efficient.

Just like that, a lot of Bitcoin miners in Russia have been purchasing numerous video cards for Bitcoin mining. According to the latest local reports, it may happen that usual Russian Internet user will not be able to buy a video card for Bitcoin mining due to scarcity. Russian sources state that people purchase up to 600 video cards at once.

AMD and Nvidia GPUs prices surge

The similar situation applies to the US GPU manufacturers. The Nvidia and AMD are now seeing the increases in demand like never before. Modern cryptocurrency miners operate by the following principle:

The more GPUs you have, the more digital coins you are able to generate.

Therefore, the users strive to buy as many video and graphics cards as they can. As a result of such crazy demand, the prices of the GPUs have risen at extreme speeds. In some countries, it is even impossible to get one.

For instance, AMD Radeon graphics cards are subject to very limited supply these days. However, if you are lucky enough to find one, you will have to pay a fortune. The recent trend has caused the Radeon RX 580, RX 570, RX 480, and RX 470 and some other models to become a scarce product.

Consequently, as users cannot find Radeon graphics cards, they turn to the Nvidia. And what they see there? The same story again. Nvidia GeForce cards from the Pascal-based 10-series product line are limited in supply. Moreover, the prices for these cards are at their all-time high records.

Cryptocurrency GPU mining bubble

Let’s summarize the effect of cryptocurrency mining trend spike. Is the spike in cryptocurrency mining trend good or bad?

Positive effect of cryptocurrency GPU mining bubble

For Nvidia, AMD, and other producers of cards with GPU technology, the positive effect is obvious. The manufacturers enjoy the increased demand, as they sell the devices at a high speed.

Where previously some of the products were sitting on shelves for months, now they are being bought as soon as they become available. In fact, from the perspective of the GPU vendor, card vendor, and the reseller, the increased demand for these products is never a bad thing.

In addition, such success for Nvidia and AMD did not pass unnoticed by the market. The stock prices of both companies have been on the rise, with their quarter report figures improving.

Negative effect of cryptocurrency GPU mining bubble

Is there any negative effect? Some believe that there is. As AMD and Nvidia enjoy the crazy popularity, there is a present underlying risk.

AMD and Nvidia GPU mining hardware rivalry 

First of all, all of us know the simple rule - the higher the demand, the higher the price. The same rule applies to the current situation in the cryptocurrency market. The prices for the video and graphics cards are surging, where some of the models see up to 30% spike in the initial price.

For instance, at Amazon.com you can see that the price for Radeon RX 580 cards shows starting prices at the $499, but stretching to as high as $699. In fact, this particular product has been launched with an expected manufacturer's suggested retail price of just $199-$239.

This trend can potentially cost AMD its long-term customers, as some of the other video cards manufacturers might opt for the lower prices. Just like that Nvidia’s items sometimes emerge as a substitute for those of AMD, considering the lower price range. As consumer switched to the Nvidia’s video card, he/she can also change the software, drivers and other things with time.

All in all, this craze around cryptocurrency might hurt both the firms in the long run.

Redundancy of GPU mining hardware

Another pitfall includes the cryptocurrency bubble burst hurting the users along with vendors. As more and more people mine cryptocurrencies, the mining operations become harder over time. Consequently, the profitability of mining coins can become much lower and can require more upfront investment.

Potentially, the cryptocurrency market might become less popular, with the value of digital coins eventually dropping. This would force the users to halt cryptocurrency operations. As a result, both users that hold a number of cards at home and GPU vendors can be left with items that they cannot sell.

In turn, the massive amounts of video and graphics cards will flow to the resale markets. This would push the prices of the mining hardware drastically down. This would affect Nvidia and AMD, as they would face older hardware prices take over the user’s attention. Thus, their newer models will have a lesser demand. This would lead both currencies’ stock prices to slide, eventually breaking down this cryptocurrency GPU mining bubble.

Where cryptocurrency market itself might not be a bubble, mining operations with GPU technology certainly are. As we understood, the long-term effects of this bubble might not be that bright.

Think we missed something? Let us know in the comments section below.

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