But Wait There’s More…
We have mentioned how the rise in bitcoin prices has caused the price of graphic cards to increase, as the GPUs in these cards are well suited form bitcoin mining, however a recent bitcoin mining crackdown in China, specifically the provinces of Inner Mongolia, Xinjiang, and most recently Sichuan, has not only caused the price of bitcoin to drop from its April 13 peak of 65,503 to its current level of 32,410, but has also caused the price of graphic cards to decline. While the price of bitcoin is still 10.3% higher than on 1/1/21, it is almost 49% lower than the peak and the notification from two (Energy & Science) bureaus to crypto-miners in Ya’an City in Sichuan that they must cease operations for inspections, indicated a change in policy for the region, the 3rd to do so. While power in Ya’an is primarily hydroelectric, making it less costly and environmentally damaging than fossil fuel, bitcoin mining uses about 10% of the power generated in the region. The shutdown begins on June 25 and does not have an end date as yet.
The effect of these crackdowns, which have been made under the title of the government’s plan to reduce the risk of loss to investors and prevent money laundering, but also reflects China’s inability to come to terms with cryptocurrency generally given its unregulated environment, are expected to shift bitcoin mining away from China to areas where both low-cost power is available and regulation is at a minimum. China’s state-run TV has stated that bitcoin is ‘no longer an investment to avoid risk. Rather, it is a speculative instrument’, and added that it is a ‘lightly-regulated asset often used in black market trade, money-laundering, arms smuggling, gambling and drug dealings,’ leaving little room for discussion, at least for now.
We took a sample of graphic card processors on Amazon (AMZN), and while there are only 8 items in this sample, it seems to be quite representative of the impact of the crackdowns in China. While the cards are produced by various manufacturers, they are based on Nvidia (NVDA) and AMD (AMD) GPUs with little price difference between cards base on the same processor. The average change from the peak is 21.6% and the average spread is 84.2%, and while the price reductions make it seem that graphic cards are a bargain today, the average current price in our sample is still 30.7% above the average low price.
The effect of these crackdowns, which have been made under the title of the government’s plan to reduce the risk of loss to investors and prevent money laundering, but also reflects China’s inability to come to terms with cryptocurrency generally given its unregulated environment, are expected to shift bitcoin mining away from China to areas where both low-cost power is available and regulation is at a minimum. China’s state-run TV has stated that bitcoin is ‘no longer an investment to avoid risk. Rather, it is a speculative instrument’, and added that it is a ‘lightly-regulated asset often used in black market trade, money-laundering, arms smuggling, gambling and drug dealings,’ leaving little room for discussion, at least for now.
We took a sample of graphic card processors on Amazon (AMZN), and while there are only 8 items in this sample, it seems to be quite representative of the impact of the crackdowns in China. While the cards are produced by various manufacturers, they are based on Nvidia (NVDA) and AMD (AMD) GPUs with little price difference between cards base on the same processor. The average change from the peak is 21.6% and the average spread is 84.2%, and while the price reductions make it seem that graphic cards are a bargain today, the average current price in our sample is still 30.7% above the average low price.
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