How Much Did Cryptocurrency Mining Inflate GPU Prices?


I started mining Bitcoin (BTC) in 2013 using a set of dual ATI Radeon HD 5870 graphics cards (GPUs) tucked into an old desktop chassis and hidden in my basement. The device was noisy. It used up a ton of power and fans struggled to keep up with the cooling needs of the GPU. I removed the side panel from the box and pointed a box fan toward the platform to relieve hell.

In 2013, I earned $ 4 a day on BTC and spent $ 2 a day on electricity. Not bad for passive income, but BTC mining was far from passive. The platform needed more attention than my 2 year old daughter.

Accidents were almost constant. A slight crash, an internet problem, or a look back would freeze things and require a reboot. After only a couple of months, I split the mining platform and sold the GPUs for a good profit. The Radeon HD 5870s went above and beyond because the BTC was $ 250 making mining more profitable and GPUs harder to find.

Even in 2013, the GPU supply chain struggled to keep up with the growing demand for cryptocurrency mining.

ASICs disrupt the market

In late 2013, mining experienced a massive disruption with the advent of chips that were tailor-made to do just one thing, the BTC mine. Unlike CPUs or GPUs, ASICs were only designed to undermine cryptocurrencies. ASICs were far superior to GPUs because they used less power and produced exponentially higher hash rates, which determined the speed and profitability of mining.

I used the profit from my GPU sale to drop $ 200 on an ASIC miner from Butterfly Labs Jalapeño. So I waited. And he waited … and waited a little longer.

If I had received the ASIC when I placed the order, the hash rates dictated that I would have earned 10+ BTC per day. However, ASIC manufacturers were new to the business. They did not have a solid understanding of cargo management, shipping times, or distribution. Today’s Resellers use enterprise resource planning (ERP) software. to deal with the complex dance of bringing a Chinese-made item to my Atlanta home. But Butterfly Labs did not have that software.

I finally received my Jalapeño miner in late 2013. I was baffled to see that mining competition had increased with the introduction of ASICs. My little Jalapeño could only get 0.02 BTC / day. I removed the cover and used my box fan trick and a slight overclock to get a couple of extra percentage points. But competition continued to increase. In less than a month, he was earning less than 0.002 BTC / day, $ 2 at that time.

I turned off the Jalapeño and let it collect dust in the basement. Unlike GPUs, ASICs had little value after their mining lifespan. They couldn’t be used for much longer.

Ethereum is introduced

Ethereum MiningI quit mining until I heard about a new cryptocurrency, called Ethereum (ETH), from my Facebook cryptocurrency group. Unlike BTC, Ethereum used a hash algorithm known as SHA3, which was supposed to be the ASIC test. GPU mining has made sense again.

I set up a new platform with two Radeon RX 470 GPUs. But I was frustrated by what I had to pay. The 470 was a mid-range GPU and was already somewhat outdated in 2018. The GPU demand cycle had started again and I was behind the curve.

However, I set up my GPU RX 470 with a Dell base model and started mining. Dell didn’t have room for two GPUs, so I used a PCIe extender that allowed me to have enough space for both cards. However, this setting meant that one of the RX 470s hung precariously out of the box.

Coincidentally, the GPU in permanent rappel maintained a lower core temperature because it was hanging out of the case. Happy accidents.

Profitability decreases again

Ethereum’s decline in profitability has been slower. ASICs have never taken over the GPU market. But a 2019 “cryptographic winter” has seen declining profits with the value of ETH. I no longer had a basement left over, so my mining platform lived in the corner of my room. My wife was not happy with this arrangement. I soon parted ways with my Dell and sold the GPUs, but this time for a loss.

The Cycle Continues

In late 2021, the cryptographic winter broke. BTC and ETH prices returned to all-time highs and continued to rise. The global adoption of cryptocurrencies has grown. But the shortage of chips, fueled by the pandemic, meant that GPU supply did not grow with mining demand. Prices in second-hand markets like eBay exploded as no one could find a new GPU in stores. Second to a JPR reportcryptocurrencies bought 25% of all GPUs produced in the first half of 2021.

Tom’s hardware discarded eBay to highlight how cryptocurrency-induced demand and pandemic-reduced supply combined to achieve a perfect GPU price storm.

Prices of Toms Hardware


There was a clear increase in auction prices in February 2021. Limited supply meant fewer GPUs were sold and those that hit the market tripled retail. After all, why would anyone sell their RTX 3090 when they could use it to mine and get a great return?

A year before prices start to stabilize

After a tough year for GPU buyers, we started to see the light at the end of the tunnel. Cryptocurrency prices are off their all-time highs. And Nvidia and AMD are finally starting to ship more GPUs. It’s still almost impossible to find them in stores, but GPU prices on eBay are falling.

Will the participation test break the cycle?

Along with rising supply and slowing mining demand, there is a dark horse that is affecting GPU prices today: the proof of participation. BTC, ETH, and most other cryptocurrencies have historically relied on a working test model to maintain decentralization and blockchain security. Essentially, rewards are distributed to miners based on the hash rate or processing work they contribute. (This is a simplistic explanation. For more details on mining, see this.)

The participation test changes this traditional model and distributes rewards to someone who “bets” on the existing ETH. So on average, you earn more by betting more ETH and not contributing more work in the form of algorithmic hashes.

We don’t know exactly when the ETH blockchain will fully pass the participation test. But the general consensus is the end of 2022. By then, hundreds of thousands of miners will no longer be able to extract ETH with their GPUs. Some may switch to other cryptocurrencies, but many will download their GPUs in reseller markets. I predict we see drastically reduced GPU prices.

Some miners may choose to exit before this transition and sell their GPUs before the market is disrupted. Therefore, it is likely that we will see continuous declines throughout 2022.

But who knows? Another cryptocurrency that uses working proof can explode in the market and start the cycle again. I know my old Dell case is ready to return to play.

This article was written by Priceonomics partner, Recurrency, and was originally posted on his blog.





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