According to an article published by Bloomberg On June 16, 2022, the collapse of cryptocurrency prices, combined with the drastic drop in the price of graphics cards (GPUs), prompted many miners to sell their GPUs. This phenomenon is explained, among other things, by the gradual end (by 2024) of the shortage of electronic components, but also by the fall in the cryptocurrency market.
An essential component for mining
Since the creation of the Ethereum blockchain in 2015, miners have reportedly paid nearly $15 billion to acquire graphics cards. According to a study carried out in June 2021 by Jon Peddie Research Instituteabout 25% of existing graphics cards were purchased for cryptocurrency mining.
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These graphics cards (and their enormous associated computing power) are necessary in order to validate all transactions on the blockchain. Until 2022, Ethereum used proof of work to validate each of the blocks of the blockchain, but it should now switch to proof of stake, which consumes less energy.
In 2020, the price soars due to the shortage and cryptocurrency miners
It is in 2020 that the purchase of graphics cards for the Ethereum blockchain is at its peak. With the shortage of electronic components, the prices of GPUs have simply exploded. Even if the shortage is one of the reasons for this price boom, cryptocurrency miners also have their part in this phenomenon.
Indeed, the latter have indirectly increased prices exponentially by buying the smallest stock of graphics cards, without necessarily worrying about computer scientists or video game players also wishing to acquire these products. Thus, during the year 2020, it was necessary to pay several thousand euros to acquire the best graphics cards, while the prices recommended by the manufacturers did not exceed one thousand euros.
A drastic drop in the price of graphics cards in a few months
In 2022, the situation with electronic components has improved slightly. Even if the shortage persists for certain sectors, the situation seems more livable than at the start of the Covid-19 pandemic. Thus, the prices of graphics cards have gradually fallen: in December 2021, their average price was around 750 dollars, and fell below the 500 dollar mark at the end of March 2022.
But another phenomenon has accentuated the drop in the price of GPUs: the fall in the cryptocurrency market. Following the crash of the UST and the rise in inflation, the sector entered a new bearish phase. Thus, Bitcoin has stabilized around $20,000 and most cryptoassets are in the red, which is the case with Ether, which fell back to $1,100, for a drop of almost 40% in a few weeks. only.
Mining becomes something less lucrative, to the point that the price of the energy used and that paid for the acquisition of high-performance graphics cards exceeds the money accumulated thanks to mining.
This phenomenon had already happened in 2018, when cryptocurrency miners had already resold graphics cards en masse when the market had suddenly fallen. Within months, some of the most successful graphics cards of the day had lost two-thirds of their value.