Sujha Sundararajan
·4 min read
Key Insights:
As BTC and ETH are rapidly losing value, swaths of miners are forced to sell hoarded GPUs for auction.
Some industry experts say that mining a single BTC now would cost up to $25,000.
Ethereum would switch to a Proof of Stake model, meaning miners would no longer use GPUs.
For many years, bitcoin (BTC) mining has been an astonishingly lucrative activity, with gross margins as high as 90%.
For mining profitability, three key factors are responsible – the price of BTC, high power costs, and computing hardware. Currently, all three factors contribute to major distress among miners.
For instance, BTC and Ethereum (ETH) are rapidly losing value. The largest cryptocurrency by market cap once traded above $67,000 before falling prey to the overall market crash. BTC is now trading at as low as $20,430 at press time.
On the other hand, ETH is the worst-hit crypto, losing its price by 70% in one month and now trading at $1087.
These mining centers, akin to data centers, are power-hungry and consume enormous electricity. According to the Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes around 110 Terawatt Hours per year, roughly equivalent to the annual energy consumed by countries like Malaysia or Sweden.
According to Daniel Jogg, CEO of Enerhash, a company running blockchain data centers, the energy rates have soared up in some parts of Europe that mining one BTC would cost up to $25,000.
Given these factors, miners have given up on graphics processing unit (GPU) mining. They are forced to auction graphic cards on online marketplaces at less than half the cost of the GPUs.
Mass sale of graphic cards for auction
Crypto miners and internet cafe owners, who were involved in buying mass graphic cards for mining, are left with nothing but to dump their GPUs or sell them for as low as $300-$350.
GPU flood is here.
Chinese miners and South Asian ecafes now dismantling their mining rigs and putting cards up for auction on livestreams.
3060 Ti's going for $300-$350 US … pic.twitter.com/kphmIt7vZw
— Hassan Mujtaba (@hms1193) June 21, 2022
On Tuesday, pictures of mining grids flooded online on various Chinese internet services companies likeBaiduthat was up for sale.
Graphic cards from AMD and NVIDIA were sold for over half their actual costs. For instance, the popular NVIDIA GeForce RTX 3060 Ti graphic card is now auctioned for $300, when the actual price was over $700-$800 a few months ago.
Users took to Twitter and other forums advising buyers not to buy these GPUs as they were “abusively used for mining.”
One user on the Geeks 3D forumnoted,
“With the crash of the crypto market (Bitcoin, Ethereum as well as other cryptocurrencies), a lot of graphics cards are now on sale by some of the most important of crypto miners (Chinese GPU miners, scalpers, and Internet cafes) at low prices, below MSRP! Keep in mind that these graphics cards were abusively used for mining during months, and it’s not recommended to buy one of them.”
However, enthusiastic gamers would still find these overly used graphic cards useful and buy them at a great deal. According to aBloombergreport, Ethereum miners have spent roughly $15 billion on GPUs during the previous mining craze since 2021.
GPUs are no longer useful for mining
As Ethereum is shifting from its proof-of-work to proof-of-stake mechanism, many miners aren’t happy, forcing them to find an alternative.
As reported by FX Empire, ETHannouncedthat it would shift to POS between the third and fourth quarters of this year. It is a significant step as it reduces energy consumption by more than 99%, good news for environmentalists and crypto critics.
However, ETH has pushed this merge several times, disappointing expectant. Tim Beiko, a computer scientist who coordinates Ethereum developers, noted that the odds of it not happening this year are “very low.” He added,
“The thing I want to avoid is someone buying a mining GPU today, and the Merge happens this summer, making it almost worthless.”
This article was originally posted on FX Empire
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As an expert in cryptocurrency mining and blockchain technology, I can provide insights into the key concepts mentioned in the article.
1. Mining Profitability: The article highlights that mining profitability depends on three key factors: the price of BTC, high power costs, and computing hardware. Mining has historically been lucrative, with gross margins reaching up to 90%. However, the current market conditions, with BTC and ETH rapidly losing value, are causing distress among miners. This is supported by evidence such as the drastic drop in BTC and ETH prices, impacting the overall profitability of mining operations.
2. Cryptocurrency Prices: The article discusses the significant decline in the prices of Bitcoin (BTC) and Ethereum (ETH). BTC, once trading above $67,000, has dropped to as low as $20,430, while ETH has lost 70% of its value in one month, trading at $1087. These price fluctuations directly affect the profitability of mining operations and influence miners' decisions to sell off their mining equipment.
3. Energy Consumption and Costs: The energy-intensive nature of cryptocurrency mining is emphasized, with data centers consuming enormous electricity. The Cambridge Center for Alternative Finance (CCAF) estimates Bitcoin's annual energy consumption to be around 110 Terawatt Hours, equivalent to the energy consumed by entire countries. Evidence from Daniel Jogg, CEO of Enerhash, suggests that energy rates in some parts of Europe have risen to the extent that mining one BTC could cost up to $25,000.
4. Shift to Proof of Stake (PoS): Ethereum's transition from a proof-of-work (PoW) to a proof-of-stake (PoS) model is discussed. This shift, expected between the third and fourth quarters of the year, would eliminate the need for GPUs in Ethereum mining. The article mentions that this change would reduce energy consumption by more than 99%, addressing concerns about the environmental impact of cryptocurrency mining.
5. GPU Market Dynamics: The article provides evidence of the current state of the GPU market, with miners forced to sell their hoarded GPUs due to declining mining profitability. Graphics cards from AMD and NVIDIA are being auctioned for significantly lower prices than their original costs. Enthusiastic gamers are advised to exercise caution when purchasing these GPUs, as they may have been "abusively used for mining."
6. Ethereum Miners' Spending on GPUs: According to a Bloomberg report, Ethereum miners have spent approximately $15 billion on GPUs during the previous mining craze since 2021. This information demonstrates the substantial financial investment made by miners in acquiring hardware for mining operations.
In conclusion, the article provides a comprehensive overview of the challenges faced by cryptocurrency miners, including the impact of price volatility, rising energy costs, and the shift in consensus mechanisms. The evidence presented underscores the current difficulties in the mining industry and the consequential actions taken by miners, such as selling off GPUs at reduced prices.
