2021 has been a very hectic year, and nowhere is that expressed more than in the financial markets, particularly with regards to cryptocurrency. New coins and blockchains are more popular than ever among the general public, with the appeal of currencies being less of a way of trading with them and more of a way of speculation (i.e buying currency, letting it appreciate for a few months, and selling it off for a profit.)
However, the subject of this post is not buying cryptocurrency, but rather mining them- using computer hardware to create new, valuable currency. To do this requires power- lots, and lots, of power to solve complicated math problems in order to receive currency. And to get this power, cryptocurrency miners are buying extremely large amounts of GPUs (graphical processing units). This high demand for GPUs has meant prices have increased drastically.
This isn’t the only factor at play, either. The supply chain crisis that has hit the country and the world has meant that manufacturing times are longer, shipping is more expensive, and many produced goods are facing shortages. Such is the case for GPUs; Samsung and TSMC, which manufacture most of the market’s GPUs for graphics cards produced by Nvidia and AMD. The result? Prices for graphics cards that trend over twice their original MSRP (the price recommended by a manufacturer).
So what about the supply chain crisis is specific to the manufacture of graphics cards? The answer is probably semiconductors. These small parts are crucial to almost every technology that we interact with, such as televisions, cars, computers, and so on. Because of the increased presence of working from home during the pandemic, demand for semiconductors has shot up- and this is coupled with increased shipping costs (nearly ten times pre-pandemic prices, according to this BBC article.)
Is there a solution to this? Sort of: the most effective way would be to give the problem time. The issue in the first place was that producers couldn’t keep up with the fast increase in consumer demand, due to shutdowns and restrictions put in place to slow the spread of the virus. Letting these factories return to pre-pandemic levels of production would do much to stabilize prices. For GPUs, though, a large factor would be the popularity of crypto mining. If the difficulty of mining various cryptocurrencies (e.g. Bitcoin or Ethereum) starts to increase, then mining would become less popular, leading to lower GPU prices. We are already seeing this with Ethereum’s difficulty bomb, meant to significantly reduce the cost-effectiveness of mining. This, however, is not expected to go into effect until mid-2022. As such, the future of the GPU market seems uncertain, although there is a large chance of prices decreasing for now.