GPU, which are Graphics Processing Units, and act as a primary computing device for cryptocurrency mining because of the power they deliver technologically to the masses, may serve as a compelling correlation for cryptocurrency traders who are willing to examine corporate reporting among chip makers and the value of their own digital asset holdings.
While companies like Intel, Nvidia, and ADM control a predominant amount of the GPU marketplace and derive a solid percentage of their core business from selling the GPU products to cryptocurrency miners, revenues are predicted to fall.
These companies via their quarterly earnings forecast that the purchasing of GPU technology will begin to decrease in the coming quarters and year.
The eroding profit equation may be a perception among their analysts who suspect a decline in ‘mining’ is coming because of the rising costs associated with mining enterprises, but it is also certainly related to the changing technological composition of engineered – open source decentralized architecture.
Miners within the digital asset world continue to seek methods which allow for stronger and faster computational applications to be used as bigger mathematical calculations are needed because of the increasing amount of hash functions needed to create a single coin because more ‘nodes’ are needed among the likes of Bitcoin, Litecoin, and Zcash.
The biggest competitor emerging against GPU in the computational field is ASIC (Application Specific Integrated Circuits), and potentially creeping onto the horizon is technology via Google – which is reportedly close to launching – its TPU2 technology, which is an improvement on its Tensor Processing Unit and could prove a wildcard should Google decide to share this power – but this remains to be seen.
Many cryptocurrencies which use mining to create coins are trying to fight back against stronger applications such as ASIC because these stronger applications eliminate the ability of ‘the common man’ to be part of the mining landscape – and put these capabilities largely in the hands of only the well-funded.
Decentralized cryptocurrencies were supposed – in theory – to battle against the powerful. The control of cryptocurrency mining is predominantly in the hands of the elite when it was actually meant to give a voice to those who felt concentrated authority was an ‘evil’ – like central banks and fiat currencies which were argued to be false gods by some of the creators behind blockchains and their respective cryptocurrencies.
For instance, Vertcoin is said to be actively fighting against the use of ASIC’s – but problems persist in actually proving the systems – like Vertcoin’s which have built to keep out the big players – actually work. Vertcoin has reportedly said, it will initiate a ‘hardfork’ if it feels it is vulnerable to ASIC miners.
The question for traders, speculators, and investors in cryptocurrencies is if the correlation of sales of GPU and ASIC’s can be formulated into a working index to judge values in the digital value realm. We are not looking to solve the question here, but to point out the possibility that the technology behind ‘mining’ cryptocurrencies can be monitored and used as a potential sentiment gauge.
Cryptocurrency traders have an interesting correlation which may give rise to a method in order to judge market psychology for values of digital assets via the world of GPU and ASIC as a ‘viewable commodity index’. Thus, a barometer for relative strength and outlook of the broad cryptocurrency marketplace to decipher where the next price trends will develop is feasible.
ASIC is dominated by Bitmain of China. And cryptocurrencies such as Monero are aware of the grip on cryptocurrency mining Bitmain controls and are talking about making changes to its Proof of Work algorithm in an effort to confront Bitmain with modifications which they would have to recalibrate. And it should be pointed out that players like Samsung, Fujitsu, IBM and a host of other companies are developers of ASIC systems.
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While the sales of GPU are important via figures for the cryptocurrency community, the actual chief market for GPU are gamers which need the chips for the graphics interface. The high costs of GPUs because of price gauging caused by demand via the mining community has actually hurt the GPU market because gamers were not willing to pay the escalating prices in the resale market.
It is thought that a decrease of prices in the resale market for GPU devices will actually help companies like Nvidia, ADM and Intel perhaps – because they will once again start to pick up market share from game developers.
The climbing costs of ‘mining’ to create nodes becomes more expensive as more power and greater computational power is needed to create a coin.
Large companies have emerged within the ASIC landscape who can afford to mine cryptocurrency, and they are always looking for technical advantages to develop stronger capabilities of ASIC as an ingredient mechanically to effectively generate profitability.
Traders should not necessarily believe a decline in GPU means the value of cryptocurrencies will drop, but instead should look at the total computational application environment to make a judgment regarding sentiment and the trends in value it may create. Proving – as always – there are no simple formulas to determine worth.
Yaron Mazor is a senior analyst at SuperTraderTV.
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