The world faces an unprecedented shortage of Graphics Processing Units (GPU) mostly fueled by Ethereum mining. Developments in the cryptocurrency space drive used GPU’s prices higher.
Ethereum is the second-largest cryptocurrency after Bitcoin. It is viewed by many traders and investors as more useful than Bitcoin and as having a broader purpose, such as supporting distributed applications and smart contracts.
Because many Forex brokers do offer their customers access to other markets besides the traditional FX, it is worth discussing Ethereum’s recent performance and its close relationship with GPU shortages around the world.
The cryptocurrency market took a big hit when Elon Musk, the CEO of Tesla, announced that the company would not accept Bitcoin as payment for its cars. Mr. Musk’s explanation was that Bitcoin uses huge amounts of energy, mostly generated by fossil fuels in places like China.
Unsurprisingly, investors turned their attention to other cryptocurrencies. Ethereum was the obvious choice as the second-largest cryptocurrency by market capitalisation. It does not consume vast amounts of energy like Bitcoin does, but its increased popularity triggered a shortage of chips or GPUs.
GPUs Prices Skyrocketing Due to Ethereum Mining
The market for GPUs is typically driven by new technologies. New developments in the industry mean that old chips, mostly used in the gaming industry, have to be replaced quickly by new, more performant versions.
But recent developments in the cryptocurrency space have led to an increase in GPU prices – for both new and old chips. The rising prices of Bitcoin and Ethereum in the past six months have caused investors to dedicate more resources to mining cryptocurrencies.
Mining is only profitable once the price exceeds a certain level – a level that covers the expenses incurred in the process. While Bitcoin’s rise during the 2020 COVID-19 pandemic was heavily mediatised, Ethereum outperformed.
In 2021 alone, the ETH/BTC cross quadrupled in value, suggesting stronger interest for Ethereum than Bitcoin from the retail and institutional investing community. In the meantime, the price of Ethereum followed the bearish trend seen on Bitcoin.
However, the GPU prices have not declined yet, fueling the hopes of Ethereum buyers that the rising trend will soon resume. But if the GPU prices start falling too, it suggests we may be in a deeper cryptocurrency bearish trend than many fans like to admit.