GPU prices have finally dropped to normal levels. Exhale, take a step back; The GPU shortage is over. But don’t settle for long. I don’t have a crystal ball, but it’s a good idea to start planning now if you want one best graphics cards.
While prices are as low as they’ve been in almost two years and next-gen GPUs are on the horizon, another potential shortage could mean more months of waiting. And the last five years and two generations of graphics cards have shown that another crypto boom could lead to inflated prices again.
You’d think that after five years and two disastrous generations, AMD, Nvidia, and Cryptominer would find a more elegant solution to mining than buying a bunch of graphics cards. And they have, but one problem causes another to crop up, which is a big reason why GPU bottlenecks can be less of an event and more of a cadence.
Late 2017 to 2018 was all about Bitcoin. As I will explain in more detail later, the demand for graphics cards increased with the price of Bitcoin. The reason? Well, GPUs are much better than CPUs for mining, which is why they are often targeted. But Bitcoin miners these days have an even more efficient tool – ASICs, or Application Specific Integrated Circuits. As the name suggests, these are computers optimized for one purpose only – and in this case, that is cryptocurrency mining.
While it’s easy to stare at an aspiring miner who buys five or ten graphics cards, much higher prices and bottlenecks come from industrial mining, the kind that happens at scale. These miners are now largely using ASICs to mine bitcoin, rather than gobbling up graphics cards that offer a much lower return on investment.
Enter ether, a cryptocurrency that has joined the ranks of Bitcoin in name recognition. The GPU shortage in 2020 largely came from Ethereum, which has the distinctive trait of being ASIC resistant. That’s right, Ethereum was specifically designed to withstand working with ASICs. There are a number of reasons for the crypto community – including the decentralization of computing power – but the important point is that Ethereum works best with GPUs, while Bitcoin has largely moved to ASICs.
And make no mistake: Ethereum has been the driving force behind the mining-related sales. Ethereum miners spent about $15 billion for GPUs over the past year and a half, accounting for nearly 25% of all GPU sales. A report suggested so a quarter of GPU sales in the first half of 2021 also went to miners.
Regardless of which new cryptocurrencies become popular or if Ethereum ever moves to proof-of-stake, it is clear that graphics cards play a crucial role in cryptocurrency mining – and they probably always will. The only way GPU demand from cryptocurrency miners can go away is for cryptocurrency to go away, and that’s not going to happen any time soon.
The pandemic has undoubtedly had an impact on prices, but the rapid drop in GPU prices in early 2022 reveals what has supported such high, sustained prices. Just days before $800 billion in cryptocurrency value Vanished from the market in May, GPUs fell around 15%. And a month later, as crypto prices continued to fall, GPU Prices Drop Another 15%.
It’s true that the supply chain issues exacerbated and prolonged the GPU shortage, but we have the historical context to see that it wasn’t just the supply chain. Bitcoin, when it was still mined with GPUs, went from around $7,000 per coin in November 2017 to almost $18,000 in early 2018. And over the same period, prices of GPUs almost doubled. You don’t even have to look that far back to see the correlation. The term “GPU prices” it achieved the highest search volume of all time (even during the recent GPU bottleneck) in early 2018.
And of course there was no pandemic back then. Improving the supply chain has helped GPU prices fall below MSRP, but the mass drop in price largely came as Ethereum fell. It’s been steadily declining since early 2021, but it saw its biggest drop in May (around 32%) just as GPUs were becoming much more affordable.
Some estimates say the chip shortage won’t be fully by 2024, and frankly, supply chain problems don’t suddenly go away in a month. The GPU shortages of 2017 and 2020 are complex and based on many different factors, but the consistent thread between them is crypto, and that’s important to keep in mind for next-gen GPUs.
If Nvidia and AMD maintain their normal release cadences, we expect RTX 40 series and RX 7000 GPUs later this year. Hopefully we won’t see another GPU shortage, but it will come down to demand from cryptocurrency miners.
Although the shortage was as severe in 2017 as it was in 2020, it didn’t last nearly as long. GPU prices boomed for about six months just before crypto flattened out. In 2020, supply chain issues have exacerbated a similar situation, stretching it out for nearly two years.
The last two generations have been marked by noticeably high GPU prices as crypto soars, and there’s no reason to think this generation will be any different. The good news is that while we’ll see higher prices as next-gen GPUs roll out, we probably won’t be stuck in two years of GPU hell.