Technology

Are Bitcoin And Ethereum The Cause of High Graphics Card Prices?

Bitcoin Ethereum High Graphics Card Price
vjkombajn / Pixabay

Graphics cards for computers have been notoriously expensive throughout their existence. But some recent reports state that the reason for a sharp increase in graphics card price is demand from crypto miners. Many people familiar with crypto mining agree that it’s not generally worth it to mine some coins like Bitcoin without a high-powered miner anymore. So where is the price hike really coming into play?

Miners Buying Up Stock

Mining cryptocurrencies like Bitcoin and Ethereum is the process of using one’s computer to help complete complex calculations necessary to confirm transactions on the blockchain. In return for that, the computer that solves the calculation gets paid in Bitcoin or Ethereum.

Some people also blame Ripple. However, Ripple’s cryptocurrency, XRP, is not mined. When they first created their blockchain, they decided on a set number of XRP.

In order to be successful when mining Bitcoin, one needs a powerful mining rig. Mining rigs can now be purchased from several companies, or one can build their own powerful PC, usually with numerous graphics cards.

Graphics Card Price

That leads us to the current situation. Because crypto miners buy numerous graphics cards to build a Bitcoin or Ethereum mining rig, there is more demand than supply. That means retailers know they can raise the graphics card price above the normal MSRP. For example. The Nvidia GeForce GTX 1070 was listed as the number one GPU for mining by TechRadar. Miners, as well as gamers and other people building PCs, love it because it’s powerful, but it has a lower energy draw than other cards on the market.

This has driven the price up. Looking at Amazon, many retailers have marked up their stock of GTX 1070 to around $1,000. Elsewhere, like NewEgg or Micro Center, the Nvidia GTX 1070 can be purchased for around half that amount. The wildly varying graphics card price is a simple lesson in supply versus demand economics.

Mining Only Rigs

In recent years, companies have begun building rigs specifically for Bitcoin and Ethereum mining. AntMiner is the most successful of these companies. Their latest mining rig, the S9, costs between $2,500 and $6,000 on the market today. That’s because of a low supply. They only release a certain number of rigs every so often. These run at roughly 13,500 terahash per second. Hash per second is how fast a computer can run through the calculations to find the nonce. Nonce is a “number used once” which is the key to unlocking the data block in the blockchain and solving the calculation. To put it in everyday terms, the S9 is hella fast for Bitcoin and Ethereum mining.

An Nvidia GTX 1070 runs at 30 megahash/s, so in order to compete, and that’s what mining is, competing to be the first to solve the calculation, you’d need at least a handful of them. Six GTX 1070, with an average graphics card price of $600, puts just the cost of the cards at $3,600 and would give a miner 180megahash/s. That’s still just a hundredth of the power of the AntMiner S9.

But that’s the rub. When a thousand people go out in search of six GTX 1070’s, suddenly, a supply that would have served between 3,000 and 6,000 gamers, is used up by miners. Supplies run short, production can’t keep up, or they aren’t being made anymore, the retailers see the high demand, and in response raise their prices to whatever they think the market can handle. Currently, $550 to $1000 for a graphics card price that should be around $380.

Miners are the Problem?

It’s probably true that Ethereum miners have been part of the problem of rising graphics card prices. However, that is not the full story. Heading over to Micro Center one can see they have a statement up specifically talking about this. Part of that statement reads:

High demand from crypto currency miners, combined with constrained shipment from vendors, has created industry-wide shortages.

So the problem is not only high demand, but also short supply. Micro Center is taking a stance based less on a money grab and more on market forces. They are attempting to keep their prices competitive against other outlets like NewEgg and Amazon. Mining Bitcoin on GPUs has not been efficient or worthwhile for several years now. Many Bitcoin and Ethereum miners have moved to ASICS, which are what the AntMiner rigs use. But many other altcoins can still be mined with decent efficiency on GPUs.

The New Normal?

Many people blame Bitcoin for being the problem. But that’s far from the truth. More and more alternative cryptocurrencies are showing up on the scene. Those cryptos are easier to mine though worth far less than Bitcoin. The problem is not Bitcoin, and not even Ethereum. The problem is high demand and limited supply causing a price crunch that is pushing prices upward because the retailers sitting on stockpiles of the cards see an opportunity to line their own pockets with cash as the expense of everyone else. Personally I applaud Micro Center, and B&H for holding the line and keeping their prices at a reasonable mark up.

At time of writing, a GeForce GTX 1070 Gaming X 8GB card is $569.99 at Micro Center, and $559.89 at B&H (out of stock). NewEgg has raised prices over $1,000 as have most sellers on Amazon. Prices vary on eBay between $510 and $1,000.

Bitcoin was trading at $10,300 this morning with Ethereum at $1,110.