Ethereum Proof-of-Stake Switch and Weaker Crypto Mining Demand Trigger GPU Price Drop

The heyday of graphics processing units (GPUs), which are widely used for cryptocurrency mining, is coming to an end as demand weakens and prices begin to fall, with Ethereum nearing its goal of migrating to a proof-of-stake (PoS) model.

The price of popular GPU models available on eBay has plummeted 37% since May last year, after China began cracking down on crypto mining in the country. Since then, the rate of price decline has accelerated, which could be attributed to weaker demand as Ethereum’s migration to proof-of-stake draws closer.

For context, GPUs are considered necessary hardware in cryptocurrency mining in the Proof-of-Work consensus mechanism used by crypto miners to mine crypto assets like Bitcoin. In this setup, a decentralized network of computers validates transactions.

Hackers linked to North Korea are responsible for the theft in March 2022 of $620 million in ethereum, a type of cryptocurrency Photo: AFP/INA FASSBENDER

Ethereum’s imminent switch to the Proof-of-Stake system, called The Merge, will make the GPU redundant as in the new system, users will be able to validate transactions and create new blocks by staking or locking Ether.

The prices of the main GPU models in the industry have been in free fall this year, starting at 7.4% in January, 9.5% in February and 12% in March. An Easter weekend roundup by 3D Center Germany reported that AMD GPU prices fell 13% on average, while Nvidia GPUs plunged 6%.

Susquehanna analyst Christopher Rolland previously noted that the margin over the manufacturer’s suggested retail price (MSRP) fell from 77% to 41%. In addition to this, a report this month from Tom’s Hardware revealed that the price of Nvidia RTX and Radeon RX GPUs have dropped month over month.

According to the report, many of these GPUs have dropped their prices by more than 10%. Apart from this, the site revealed that several retailers have inventory for days without selling, something that had not been seen in 2020 and 2021.

Earlier this month, Ethereum Foundation developer Tim Beiko said that The Merge might not happen any time soon. “Not June, but probably a few months from now. No firm date yet, but we are definitely in the final chapter of PoW on Ethereum,” he tweeted.

Ethereum was trading up 4.79% at $3,004.10, on 24-hour volume of $21,073,561,478, as of 12:46 a.m. ET on Tuesday, according to data from CoinMarketCap.