Ethereum's rise causes GPU supply shortage, mining machine manufacturers challenge Nvidia

Ethereum, the second largest cryptocurrency by market cap, has risen more than 40% in the past 30 days. As Ethereum mining machines become scarce, the rising price of Ethereum has put pressure on the GPU graphics card market.

Media reports that as the price of Ethereum began to grow exponentially, it became increasingly difficult to buy high-end GPU graphics cards. Ethereum ( ETH ) hit an 11-month high on Monday, reaching $327 per unit.

Statistics from Etherscan show that Ethereum’s network hash rate has increased by 25.7% since the first week of January 2020, and on July 28, the ETH total network computing power ( hash rate) was approximately 194,650 gigahertz per second (GH/s).

Nvidia has also begun to stop producing RTX 20 series GPU chips, hurting the industry in the short term, according to Chinese GPU mining machine manufacturers. Nvidia plans to release the next-generation version of the RTX 30 series graphics cards in the near future.

“The price increase of GPUs is mainly caused by two chip suppliers,” a GPU mining manufacturer told the media. “Due to the COVID-19 pandemic, ordering plans have been reduced and production capacity has been limited. In addition, they have consciously limited over-purchases in the mining industry to avoid affecting the subsequent consumer market. I think new products will be available after September.”

This is not the first time that GPUs have been in short supply due to an influx of Ethereum miners, and many are hoping that Ethereum 2.0, which will add proof-of-stake (PoS) functionality to the security of the Ethereum network, will reduce the need for GPU mining.

In March 2018, Nvidia CEO Jensen Huang complained about the global GPU shortage caused by Ethereum miners. He believes that the crypto asset network can take advantage of distributed high-performance computing.

“The way to think about it at the highest level is that because of the philosophical design of cryptocurrency — which is really about taking advantage of distributed high-performance computing — almost everyone in the world has a supercomputer, so there is no single centralized power or entity that can control the currency.”

The Nvidia co-founder further stated:

Cryptocurrency mining is not our business. The gaming industry is constantly evolving, professional workstations are also evolving, and GPU demand is barely keeping up with the market.

Vincent He, a columnist for Babbitt, detailed that Chinese miners have switched from Bitcoin mining to Ethereum mining for faster returns. Currently, the profit payback period for Bitcoin mining may take 600 days, but using Ethereum mining can be reduced to 200 days.

In addition, Chinese ASIC manufacturers not only build SHA256 mining equipment, but also produce customized GPU Ethereum miners a10 pro 500m, and the market is beginning to flood with professional equipment with graphics processing units. Wang Shenglin, sales director of Innosilicon, has seen this trend in demand for GPUs.

"Ethereum continues to lead the crypto market, and the current price adjustment of Ethereum mining machines is relatively small. If the subsequent source of machine supply continues to decrease, we may adjust the price further," said Wang Shenglin.