Bitcoin mining causes unprecedented graphics card shortage, Nvidia limits purchases to 2 cards

In recent weeks, high-end GPUs have been out of stock at almost all major retailers abroad, and prices for high-end graphics cards have soared, and the shortage does not seem to be ending soon. The unprecedented shortage of GPUs is behind the influx of miners who have joined the mining craze for cryptocurrencies such as Ethereum and Bitcoin. Gamers are having a hard time getting a card, and Nvidia has even implemented a "two-card purchase limit per user." Will the shortage of graphics cards continue in 2018, or will Nvidia, AMD, etc. take a gamble and increase graphics card shipments?

Over the past few weeks, there has been a lot of lamentation in the foreign cryptocurrency circle: good graphics cards are almost impossible to find at the right price, and the graphics card shortage does not seem to be ending anytime soon.

The GPU shortage began in December when bitcoin's surge revived interest in cryptocurrency mining, the process of generating numbers that lead to new blocks in the blockchain, which earn digital currency. To mine cryptocurrency, you need a powerful mining machine, so miners rushed to buy as many GPUs as possible.

In recent weeks, high-end GPUs have been out of stock at almost all major retailers abroad, and the price of mining graphics cards has soared. The GTX 1080, which usually retails for $550, has exceeded $1,000 on the third-party market. Leading graphics card manufacturer NVIDIA has even begun to restrict its online sales, limiting the purchase of two per user per product, and requiring retailers to prioritize the sale of its graphics card products to gamers rather than digital currency miners.

Of course, most GPUs are sold through retailers, not NVIDIA's official stores, and a glance at the shelves of Best Buy stores in the United States shows that there is a severe shortage of graphics cards . Computer part prices tend to have peaks and valleys, and RAM is expensive right now, but we have never seen such a sustained, widespread shortage. The report published on the website arstechnica on Friday stated that there is an unprecedented shortage of GPUs.

Unprecedented global graphics card shortage

The market for high-end graphics cards used to be like any other market for computer equipment: you went to your local computer parts store, picked it up off the shelf, and paid the manufacturer's suggested retail price.

But the rise of cryptocurrency mining has created an unprecedented global graphics card shortage. At Best Buy stores, shelves that once held graphics cards are now nearly empty. On e-commerce platforms like eBay and Craigslist, used cards are being sold at higher prices than the suggested retail price of new cards, rather than at a discount.

Best Buy shelves should be stocked with a wide variety of GPUs. But the more expensive ones—like the AMD Radeon RX 580 and Nvidia GeForce GTX 1080, which are the best cards for cryptocurrency mining—are sold out. The only ones left to buy are a handful of lower-end graphics cards that aren’t suitable for Ethereum mining.

This drives gamers crazy - gamers used to be the main market for these graphics cards

"There's no way cryptocurrencies are going to crash anytime soon," one gamer wrote on the PCGaming subreddit the other day. "Those of us gamers who wanted to get a new console are being forced to put our plans on hold until the market stabilizes. Others who bought high-end graphics cards a few months ago are considering whether to resell them for a nice profit."

Jared Walton of PC Gamer concluded: "Now is not the time to buy a graphics card."

The main culprit for the graphics card shortage is that high-end graphics cards are the best way to mine Ethereum and other non-Bitcoin cryptocurrencies. As the blockchain concept has become popular in recent weeks, the prices of these cryptocurrencies have risen to unprecedented heights, and a powerful graphics card can mine several dollars a day in cryptocurrencies. As a result, more and more amateur miners have begun to scramble for graphics cards, causing shortages and high prices for other non-cryptocurrency users.

Not only are there no high-end graphics cards available for purchase, but the manufacturer has notified customers that the return policy for graphics cards is being suspended.

The reason: graphics card prices have been fluctuating wildly.

Prices for AMD's high-end Radeon graphics cards have soared in recent months. Data from PC Part Picker.

According to PC Part Picker, last spring, AMD Radeon RX 570s were priced around $200, and RX 580s were averaging around $250. But around July, prices started to rise, with both cards topping $350. Prices dropped after September, but the price spikes have been more extreme in recent weeks: RX 580 cards are now averaging over $400.

This average price chart also underestimates the extent of price increases because it includes retail stores that use MSRPs and sell immediately. If you want to get a graphics card in a timely manner, you may be forced to pay higher prices to online resellers. Amazon resellers are asking nearly $500 for an RX 570, and some RX 580s are over $600.

Nvidia GeForce graphics cards are popular among miners. According to PC Part Picker, the average price of a GTX 1060 has risen from $275 to $400 since May, while the 1070 has risen from $425 to $600. Again, these average prices may underestimate the extent of the price increase, because if you really want to get a card immediately, you may be forced to spend more money to buy it from an online reseller.

This price increase pattern is closely tied to the price of Ethereum. Graphics card prices began to rise around June 2017, around the same time Ethereum prices began to surge. The current shortage also coincides with the more dramatic Ethereum boom in recent weeks.

The cryptocurrency boom is creating huge profit opportunities

So who is driving the demand for graphics cards? Cryptocurrency miners. To understand this phenomenon, we spoke to people active in the cryptocurrency mining industry, and they all told us a similar story: Ethereum mining and other cryptocurrencies have become extremely profitable in recent months, which is why so many people are racing to expand their mining operations. Getting graphics cards is the main bottleneck.

It is no longer profitable to mine coins with consumer graphics cards, as manufacturers have built more powerful custom mining rigs for ASICs that are more energy efficient. However, Ethereum has an algorithm that consumes a lot of memory and is resistant to ASIC optimizations. This means that it is still practical to use a consumer graphics card for Ethereum if it has more than 2GB of memory. Entry-level graphics cards do not have enough memory, but more advanced graphics cards have more memory.

Most people started mining in the summer of 2017 — just as graphics card prices began to rise.

Matthew Freilich shows off his first mining rig with 6 graphics cards

Matthew Freilich, an IT security expert from Philadelphia, started mining cryptocurrencies last June.

Freilich initially bought six Nvidia GTX 1070 graphics cards, which were still available at a suggested retail price of around $400 at the time. He also ordered a special motherboard that could accommodate a large number of graphics cards. Freilich used a mining-centric operating system, PIMP OS.

"I check online every day, multiple times a day, to see if the local Best Buy has graphics cards in stock," he said. "If they have them in stock, I'll buy them right away."

Freilich said it doesn't take long to earn back the money spent on the graphics cards. "I'm using 14 cards right now and I'm making about $50 a day." Each card makes about $3.50 a day. At that rate, it takes about four months to earn back the money spent on a card.

Of course, it’s not that simple. The value of cryptocurrencies changes quickly. In the short term, higher cryptocurrency prices mean miners earn more for the same effort. But Ethereum (and other blockchain networks) automatically increase the difficulty of mining as more people join the network. So if mining continues, the difficulty will rise, and Freilich’s card will generate less cryptocurrency per day, offsetting some of the gains from the recent price increase.

Another miner of Nvidia GTX 1060, 1070 and 1080 told us that he earns about $5 per day from each 1060 card (currently selling for around $400), while a high-end 1080 (costing over $700) can earn him $8 per day.

Mining has become a global phenomenon

Suleiman Alaquel's mining equipment

The blockchain network is global, so people can mine cryptocurrencies all over the world. One developer, Suleiman Alaquel, told us about his experience mining cryptocurrencies in Saudi Arabia. Saudi Arabia is an attractive place for cryptocurrency mining because electricity is cheap there. But graphics cards are expensive.

Alaquel said that almost all stores in Saudi Arabia are sold out of high-end GPUs, and some miners have already pre-ordered all high-end graphics cards for delivery in six months.

He added that you can buy high-end graphics cards on the Saudi version of Cragislist, but they are expensive. An AMD Radeon RX 580 costs around 2,000 Saudi riyals (about $530).

As for China, although the shortage is not too serious because a large amount of hardware is produced in Asia, the shortage of high-end graphics cards is still obvious, and merchants on various e-commerce platforms have marked the words " small quantity arrived, first come, first served ".

It is foreseeable that 2018 will be a year of great shortage of graphics cards. Under the article of arstechnica, a netizen commented:

I wonder how Nvidia and AMD will respond to this situation. GPU demand is clearly higher than supply, so I assume they will expand their production lines and sell more GPUs at high prices - they won't miss this huge profit opportunity.

However, no one knows whether Ethereum will suddenly collapse, and this risk does exist. Maybe no one will even be willing to spend electricity to mine. Then, both Nvidia and AMD may be trapped by the mountains of unsold GPUs and the capacity of expanding production lines. Websites such as eBay will be flooded with a large number of second-hand cheap GPUs from miners, which is enough to meet the needs of gamers. When the next generation of GPUs appears, the previous generation of GPUs will quickly become obsolete in a year or two, and their prices will fall to the bottom.

In this regard, will manufacturers such as AMD and Nvidia, which have made money by taking advantage of the GPU demand boom, invest heavily in this gamble?