Since early 2017, crypto currencies have been booming, and with them the state of most investors – over the past year the cumulative capitalization of this market has grown by more than 3300%, to $ 613 billion, leaving the  S & P 500  far behind. The year 2018 started a little differently – over the month of correction, the total capitalization of the Crypto-currency decreased by tens of billions of dollars.

Despite the  volatility , interest in crypto-currencies remains high. There  are a lot of expectations related to the technology of the  blockade : these are the changes in the financial industry, and the distribution of crypto-currencies like  bitcoin  and lightcoin, which theoretically can replace the money we are accustomed to as a means of payment.

Block is a distributed and decentralized registry, which is responsible for logging all transactions of the system; it is on it that most of the known crypto-currencies are based. It is believed that with the help of the blockbuster, you can speed up the processing of transactions, as well as reduce their cost.

Mining  Crypto-Currency

Today, many are also seized by the opportunity to earn a crypto-loan by mining. What it is? A person or company buys powerful computers, after which they try to solve the complex mathematical problem first. This task is part of the encryption system that protects transactions in the blockroom, and the first miner, who  will be able to solve it in the process of verifying the  block of transactions , receives the so-called “reward for the block”. Thus, this energy-consuming procedure is sometimes rewarded with a certain amount of crypto currency.

This mechanism does not work in all crypto-currencies. Some of them use the Proof-of-Stake mechanism, when the  owners of tokens get the opportunity to check the  blocks as a result of the draw.However, where there is a “reward for block” mechanism, it can be quite profitable. Even now, when the cost of bitcoin has fallen by almost 60%, on the mining of one bitcoin in the US, you can earn about $ 3,500 – if you consider that the electricity for this procedure on average goes around $ 4758.

Sales of video cards are growing

Bitcoin is a special case; if at first time it was still possible to muffle something using a conventional video card, now special ASIC-chips are used for this. Nevertheless, the majority of crypto-currencies can easily be thrown with the help of “household” video cards, and on the wave of the take-off of this market, NVIDIA and AMD companies that produce graphics processors saw a sharp rise in both sales and share prices.

During the last two weeks, NVIDIA and AMD published  quarterly reports . Both companies reported an exceptional year-on-year sales growth, which, of course, was partly due to mining: NVIDIA’s sales in the fourth quarter were $ 2.91 billion (up 34%), while AMD’s same figure reached $ 1.48 billion (also an increase of 34%).

What part of this  turnover  does NVIDIA GeForce and AMD Radeon have? It is not known, because none of the companies provides such detailed data, and as for the share of demand due to mining, they themselves do not know this. Nevertheless, during the final teleconference of NVIDIA it was noted:

“Although it is still difficult to assess the overall contribution of crypto-currencies to our business, we believe that in comparison with the previous quarter it grew in percentage terms.”

Probably the same can be said about AMD.

NVIDIA and AMD have problems

On paper, this rapid growth in sales looks great, and shareholders who bought shares of NVIDIA and AMD over the past two or three years have repaid their investments many times, but this growth in turnover due to mining carries with it problems.

The thing is that NVIDIA and AMD – especially NVIDIA, which for many years mainly engaged in the production of graphics processors – are developing their GeForce and Radeon video cards for gamers, and all this mining is just a cherry on the cake. It’s only recently that the miners overheated the market and thoroughly inflated retail prices for video cards – in some places they doubled or tripled compared to the recommended ones.

How is this possible? To begin with, the price is usually determined by the balance of supply and demand, and as demand for video cards has risen and production has failed, prices have gone up. Yes, both companies announced their intention to increase production in the coming months, but we know that AMD was faced with a shortage of memory GDDR5 and HBM2, which limited the possibility of scaling.

Another problem is speculators buying up all the video cards to which they can reach, and then reselling them with a double-triple mark –  up . In an attempt to somehow reduce the damage from such actions, retail networks began selling video cards only together with other electronics or to limit the number of devices released in one hand, but they could not cope with the increase in prices.

What to do NVIDIA and AMD?

  • They can still receive extra money from the miners, at the risk of scare off their main audience with high prices.
  • They can also try to prohibit the sale of video cards to miners or develop a separate graphics card for mining, not suitable for gamers, at the risk of losing this fast-growing source of income.

It should be borne in mind that the volatility of the crypto currency market is likely to also affect the revenues of NVIDIA and AMD – the above-mentioned 67% correction probably caused a drawdown in sales, but we will not know about it until three months later, when the companies report for the first quarter.

So, what do leading video card manufacturers do? Encourage miners or dealers? Your move, NVIDIA and AMD.