Credit: By Landon Manning
Casual investors may not realize the correlation, but the latest nosedives in cryptocurrency prices have also led to a tumble in the value of graphics cards manufacturing companies. As the crypto bear market continues, this phenomenon offers potential lessons for other businesses that may consider themselves only tangentially tied to the fate of cryptocurrencies and blockchain technology.
Cryptocurrencies and Graphics Cards
Those interested in high-end graphics cards, typically used for PC desktop gaming platforms, have had at least one major reason to bemoan the rise of cryptocurrencies. Although the “rigs” used to mine bitcoin don’t leverage these components, a quality graphics card can prove an invaluable piece of a mining operation for alternative cryptocurrencies.
With so-called altcoins like ether and Monero’s XMR mined via rigs centered on graphics processing units (GPU), the price of graphics cards spiked in January 2018, around the same time as the largest boom in the price of bitcoin and, accordingly, the larger cryptocurrency market. At this time, many graphics cards saw a price increase of nearly twice their original value.
Although not intending to find themselves a player in the crypto space, major graphics card manufacturers like NVIDIA stumbled upon an unexpected windfall. Indeed, with the amount of individual enthusiasts trying to cash in on the lucrative crypto market, graphics cards such as theirs were the ideal purchase.
NVIDIA seemed to be riding high on this craze, as a Forbesarticle published in February claimed that NVIDIA believed the price skyrocket would continue all year. This seemed to put other customers for these graphics cards in a bind, especially as research “predict[ed] that in the short term, prices will stay high, even if there's a mining crash.”
Winter Hits
However, the short-term results of the current cryptocurrency dip have shown dangerous signs of turning into a long-term price winter. The value of bitcoin has dropped throughout 2018. This news was compacted with the news of the most recent and rapid crash, bringing the value of bitcoin down to less than half of what it was when NVIDIA first reported a graphics card price craze in January. Even though their products have no use in bitcoin mining, asbitcoin pricesgo, so go the prices of those cryptocurrencies that can be mined using these devices.
Now firmly in a bear market that has no clear end in sight, NVIDIA reported a 17 percent drop in its stock value in a single day. A company totally untied to any cryptocurrency has now seen its profit margins fluctuate wildly based on the performance of a market that leverages its products in an unexpected way.
Although anyone looking to build a custom gaming computer or utilize graphics cards in other ways would welcome a dip in the components’ prices, this case study raises interesting questions about the future of the cryptocurrency space. How often can seemingly unrelated companies expect to see their values fluctuate based on the performance of cryptocurrencies? Has this long bear market done something to more deeply shake people’s confidence in crypto? Will people shift away from personal mining operations? Important market forces like this can provide valuable evidence of correlation and serve as a reminder that the cryptocurrency sphere touches more than it seems.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
