As the Ethereum network's shift to a proof-of-stake (PoS) consensus mechanism spurred adoption by institutional investors, prices for graphics processing units (GPUs), often used to mine cryptocurrencies like Ether (ETH), have begun to plummet in China .
The Ethereum merger changed the consensus of the Ethereum protocol from PoW (Proof-of-Work) to a more environmentally friendly PoS (Proof-of-Stake) layer called the Beacon Chain. However, it caused collateral damage along the way and hurt GPU companies that were making huge profits thanks to demand from ETH miners.
Media outlet South China Morning Post (SCMP), reported that the fall of Ethereum caused the price of GPUs in China to fall, which caused sales to reach “the lowest level in history”. Due to low demand from miners, who used to buy expensive cards, suppliers had to unexpectedly lower GPU prices by three times compared to the value suggested by GPU card factories.
Thus, high-end GPUs such as the Nvidia GeForce RTX 3080, RTX 3080 Ti or RTX 3090 have fallen in the last three months by more than 37%, from 8,000 yuan ($1,140) to less than 5,000 yuan ($712). GPU sales were a hit during Ethereum's PoW (Proof-of-work) era.
The most expensive GPUs fall by more than 37%
Following the historic Ethereum merger on September 15, the previously highly sought-after Nvidia GeForce GPU chips have become significantly cheaper, according to a report by the South China Morning Post.
"I had a customer who bought an RTX 3080 card for 9,400 yuan at the end of last year, and now he has to sell it for less than half that price, even though that model is not suitable for mining," Peng noted. This whole situation could continue due to several negative scenarios surrounding the crypto market, such as the collapse of Bitcoin, the ban on mining in China, and even new lockdowns due to COVID, which only worsened the situation.
“When the bitcoin mining wave was at its peak, people from crypto mining companies would literally just walk into the store with cash and take all the graphics cards we had in the store. At the moment, nobody even buys new computers, let alone new graphics cards,” said Peng, a trader from Shanghai.
Retailers aren't the only ones affected by lower demand. Online shopping platforms Taobao and JD also have GPU price drops. The RTX 3080 cards on these sites have become cheaper by several hundred yuan compared to the prices three months ago.
Ethereum Merger as Trigger for Low GPU Costs
Cryptocurrency mining (particularly ETH mining) has driven up the price of GPUs over the past few years; however, prices gradually fell as the Ethereum Merge approached. In just a few weeks, Chinese retailers have slashed the suggested retail price of GPUs by more than 33% to sell their gear due to two reasons: the GPU market correction and the cryptocurrency crisis.
The differences between the retail price and the price sold by the factory are huge, and GPU traders are currently trading at a loss. GPU prices were falling an average of 10% each week before the merger. While this “crash” could result in the shutdown of many e-commerce stores, for others it is the end of a two-year nightmare in which merchants drove GPU prices to record highs due to high demand from crypto miners.