It’s now over eight months since Bitcoin hit it’s all-time high, and the bear market is beginning to take its toll on the broader crypto ecosystem. Nvidia, one of the world’s leading producers of high-end graphics processing units (GPUs), has announced it is planning to cease production of its cryptocurrency mining products. Bitmain, meanwhile, are seeking to pick up the slack and further capitalize on its dominance of the crypto mining industry.
For those new to crypto, mining refers both to the process whereby transactions are verified and added to the blockchain, and the mechanism by which new blocks are created. The proof-of-work (PoW) referred to in the mining of Bitcoin involves nodes on the network solving complex computational puzzles generated by the Bitcoin software. The process involves significant amounts of energy, and it’s here that the economics of crypto mining start to fall short. It’s estimated that a BTC price of around $8000 is the minimum required to make mining profitable.
Nvidia experienced massive growth in 2017 on account of the dramatic rise in crypto prices. Demand for GPUs went through the roof, and prices reaches astronomical levels. Even a relatively utilitarian unit such as the Nvidia GeForce GTX 1060 began to fetch prices as high as $800, an increase of some 300% over its list price just six months earlier. In an effort to meet demand, Nvidia ramped up their production, only to see the bottom drop out of the market as crypto prices plummeted up to 90% from their peak. As things stand Nvidia say they’ve generated just $18 million from their crypto mining range in the second quarter of 2018, dramatically less than their projected $100 million for the period. The company say they’ve little choice but to cease production of their mining units and focus on their core markets of gaming, data processing and AI.
The story from the Bitmain camp is rather more mixed. The Chinese-headquartered giant generated over $3 billion in profits last year, and are seeking further investment for their crypto mining hardware. Although the company acknowledge some headwinds generated by the prolonged bear market, they’re moving ahead with plans for their $18 billion IPO. It seems Bitmain are also moving into AI to supplement their crypto mining income, but the company seem to maintain their profitability even in light of challenging conditions. It remains to be seen whether the crypto markets can turn the corner and return to mining profitability in the foreseeable future.
