Royal Bank of Canada (RBC) in one of its note said that crypto-mining issues are likely to persist longer than expected. With the value of the crypto-currencies declining to its lowest levels, major crypto mining chipmakers like AMD and Nvidia aren’t profitable anymore, said an RBC analyst, Mitch Steves.
Bitcoin, which has the largest crypto share by market value has fallen by 72.5% since January this year. Even the rival crypto-currencies are at their lowest values in the last 14 months. Using expensive Graphics Processing Units (GPU) to mine these cryptocurrencies are becoming more unprofitable. RBC calculated the break-even point for mining ethereum to be $175 per ether. However, the present value of ether has declined to $108 now.
Source- Youtube
Chipmakers have already hinted at the headwinds that might follow after the boom and bust in crypto-currencies. The third quarter earnings of Nvidia was released this month and it reflects that there is “essentially no crypto-currency business” moving forward as was warned by their management in August. AMD also warned about this issue earlier in July stating that the company expects insignificant contribution to their third-quarter revenue from crypto.
Source- NVIDIA
Although the chipmakers believe that this was a one-quarter thing and won’t prolong, Mitch Steves said that this will last a couple of quarters longer given the new market dynamics. He talks about two factors that have added to excess risks associated with crypto-mining using GPUs. One, GPU generally comes with two-year warranty and therefore used GPUs are also in demand which has caused near-term inventory issues. Two, companies like Bitmain have come up with superior quality chips and are providing tough competition. Bitmain’s ethereum specific mining chip is the best in the market right now, said Steves.
When asked to comment upon the performance of AMD and Nvidia, Steves said that although there may be poor performances on the crypto-end, the secular trends for both the companies remain the same. He also said that RBC will be taking a cautious stance on crypto associated revenue for both the companies for one more quarter.
