Ever wondered what the cryptocurrency fuss is all about? Why are some PC enthusiasts so upset about cryptocurrency? And why are some other PC enthusiasts so happy with cryptocurrency?
Let us take a thorough look at this tantalizing love/hate relationship, then consider what companies are doing to address the situation, and finally present a ‘new and improved’TM prediction about when the graphics card market will improve.
Cryptocurrency, What Is It?
Cryptocurrencies are a type of “digital-only” currency. You can buy/sell/transfer them, but there is no central bank like you would have for a Canadian Dollar or Japanese Yen. Instead, your Bitcoin or Dogecoin is typically saved in a digital wallet on your PC.
Some notable differences between Bitcoin et al and your Dollar/Euro are:
- Prices of cryptocurrencies can fluctuate very wildly when compared to government-backed currencies. How wild? Think roller coaster, but after fourteen coffees.
- Normal people can generate more cryptocurrencies. Only governments can generate more dollars.
We will ignore other differences between currencies for now, as these two are enough to shed light on the situation:
- Since cryptocurrency prices can swing a lot, many people can make profits by buying low and selling high (or make losses by buying high and selling low), similar to what happens in the stock market. This gambling element attracts people to cryptocurrencies.
- Since you can generate your own cryptocurrency through mining or being rewarded for mining, you can make pure unlimited profit (after subtracting the cost of hardware and electricity). This attracts people to cryptocurrencies even more!
Every part of that description is actually more complicated than it sounds there, but armed with that knowledge, you know enough to explore the following:
How Are Cryptocurrencies Affecting the PC Hardware Market?
A very large number of people are choosing to buy PC hardware in huge (enormous!) quantities, for the purpose of dedicating this hardware to generating cryptocurrencies. It is completely normal to see a cryptocurrency farm with 50 or 100 graphics cards, all running 24 hours a day, crunching numbers, verifying transactions, and accumulating coin.
Graphics cards are produced in limited quantities, particularly during the launch period of a new series. nVidia and AMD (and Intel?) may start with a few thousand cards on launch day, and produce enough chips for a year or two of the graphics cards’ lifetime. The number of gamers expected to buy such cards is relatively stable: population and demographic data only shifts around a small amount annually. Due to that limited quantity, for each customer that buys 50 cards, 49 other customers may be going without.
If a few folks start a few cryptocurrency setups on a small scale, say 5 to 10 cards each, then it will not affect supply much. But when a large number of people go to stores and (literally) clean out the entire inventories of those stores, they leave nothing behind for other customers. This happens in normal brick-and-mortar shops, as well as in e-stores. And each time a different cryptocurrency spikes in price, tens of thousands of cards disappear!
Since (approximately) September of 2020, and up to the time of this article, all modern graphics cards that can be purchased or reserved online get sold out within seconds of being available for sale. Both quick-clicking humans and quicker-clicking bots are involved in this instantaneous shelf-clearing. This is not only because of cryptocurrency, as there has been unusually high demand and unusually low supply of computer parts ever since the global quarantines started in Spring last year. But crypto has become a bigger and bigger factor in the ongoing shortage as we’ve moved further and further into 2021. Older (discontinued) models are available for extreme markups, like $750 for a $150 card. For those who cannot buy cards in the 2-second window of availability, the options are buying used cards, paying exorbitant prices for old models, or buying brand new cards from slimy resellers at even more exorbitant prices.
Thus, there is a love/hate relationship between PC hardware enthusiasts and cryptocurrency. Those who are in and are mining tend to love it; who would not love free $$$? But those who are into PC hardware but outside the cryptobubble tend to hate it. Particularly if they want (or, heaven forbid, need) to buy new hardware!
Can Companies Do Anything?
So, cryptocoin miners are buying up everything and leaving nothing behind for normal users. You might be wondering what companies are doing to remedy this situation. Well, a lot has been attempted, but nothing has succeeded. Some of what has been tried:
- Drivers to stop cryptocurrency mining
Several months ago, nVidia promised that its new cards would come with an anti-cryptocoin driver. Unfortunately, this method proved to be easy to overcome, and did not change anything. nVidia is making a second attempt at this though, and we wish them success.
- Limited quantities per customer
After the start of the shortage, some retailers have limited purchases to a few cards (or just one card) per customer. If this approach was adopted by most retailers, it would help, but… How many businesses out there would say “No!” to more sales?
- Separate cards for cryptomining
nVidia announced the CMP HX series earlier, with some CMP cards being available just a few days ago. These cards are targeted at crypto-miners, in the hope that they will buy them and leave normal graphics cards alone. As these cards are less than a month old (and we are not sure where to find them for purchase), the impact of this move is still uncertain.
- Increased production?
A scarcity problem is solvable by increasing production. We are not running out of sand; we are running low on chips! Why can’t chip-making-companies make more chips, you ask? There are multiple reasons for that:
- Companies that produce chips (such as TSMC) are building more manufacturing plants to increase production, but these plants will be complete after ~3-4 years.
- Even with increased chip-making capacity, graphics cards will still compete with consoles and smartphones, as those are also powered by the same advanced semiconductors.
- Increasing production of graphics cards on account of cryptocurrency is very risky when the value of cryptocoin is very volatile. When a tweet can wipe $365 billion of value from cryptocurrency, who can afford that kind of risk?
How Long Will this Situation Affect GPUs?
All prior efforts to fix the PC hardware shortage have ended in failure… or have they? The most recently launched AMD CPUs also faced a supply shortage, but this was fixed within a few months. Whether it was supply that was increased to meet demand, or initial high demand that fell to match the supply, the end result is the same: after many months of drought, AMD CPUs are now available everywhere.
The same will happen with GPUs: time will fix it. At some point, all those who want to buy 15, or 50, or 2500 graphics cards for mining will have bought them, and they will want no more. Alternatively, our friendly oversized cigarette lighter manufacturer will make another tweet that may crash another cryptocoin, and people’s appetite for starting cryptofarms will wane. With multiple efforts undertaken by multiple parties, time will fix this supply shortage.
But how much time? Ah! In a previous update, I had predicted that this shortage would last ~6 months, and it would end in April. That was the wrongest prediction since “Dewey Defeats Truman“: not only is it May (with no end in sight), but the current climate suggests that this supply shortage will continue till 2022.
And it may not even be over in 2022. New cryptocurrencies may arise, and more people may want to engage in neo-agriculture! The true light at the end of the tunnel can be seen when looking at the large number of chip fabrication plants expected to be completed in… 2024. That is right friends, the year 2024 is a realistic end-time for the current crisis.
But whether it’s 2022 or 2024, that doesn’t tell those of us still stuck in 2021 what we can do. So, you can expect more discussion from us in the coming month(s) about what alternatives are available for all of us, from the hardcorest of only-builders to the most flexible of prebuilt-or-laptop-accepters.