Crypto mining is quite tricky. For one, regulators are imposing stricter rules towards the activity mainly because of the amount of electricity that it needs. There are even miners looking for a better place to operate such as Canada and Iceland.
In addition to this, the cost of mining equipment can be quite expensive especially when miners have to constantly update their mining gear in order to be able to handle the evolving crypto algorithm.
Unfortunately, as the crypto market is on a bearish trend especially in June, mining profits have also decreased. And as a result, there is a decline in the demand for mining hardware such as GPUs. In fact, it is expected that GPUs could actually drop by as much as 20% in the coming month.
Decreased Interest in Mining
It is said that if Bitcoin starts to hit $5,000 that there are going to be miners that will most likely stop operations. DigiTimes which is a premier Asia-based tech news website mentioned that there is a decrease in the interest of miners.
One of the things that miners witnessed is the increase in the level of difficulty in solving algorithms. Mining hashrates grew at an exponential rate especially last year. In fact, Ethereum, which is one of the most popular cryptos mined today, recorded a growth in its hashrate by over 25 times in 2017. And because of the growing competition to solve mathematical problems, there has been an increase in the demand for high-end mining hardware. And consequently, the price of mining hardware also increased.
Unfortunately, the price of mining hardware affected common consumers including gamers that are using GPUs for their games.
Overstock in Crypto Mining Hardware
Since companies such as Nvidia and AMD had a good year in 2017 with the increased demand for crypto mining equipment, these companies have overestimated the future demand for graphic cards which led to a surplus of the hardware. Nvidia, for instance, reported that they have over one million GPUs in their warehouses.
In order to ensure that the supplies are going to be sold to the market, it is logical that these companies cut the price of their products.
And it isn’t only companies that are looking to get rid of their supply. There are also crypto miners that are looking to sell their used mining rigs. And because of this, DigiTimes mentioned that the price of GPU could actually drop by over 20% by July.
Declining Crypto Price
There is probably no single event to blame why crypto prices slipped in recent months. From hacking to regulatory changes, these are events that caused panic among crypto investors.
According to Ran Neu Ner, who is the host of CNBC Africa’s Crypto Trader show, he mentioned that there are miners that have already turned off their machines. He said that “So what’s going to happen is when the miners find that it is not viable for them to mine, what they are going to do is to switch off their machines. And there are going to be fewer machines in the ecosystem. We’ve received some notifications from some of the miners that they have already switched off their machines”.