Anyone buying hardware to mine Ethereum is going to lose

Down The Mine We Go

Put Your Hard Hat On

There's a huge cryptocurrency mining boom taking place right now, with global GPU shortages for both AMD and NVIDIA, as well as a general shortage on high-end PSUs that drive over 1000W.

This all began to spiral out of control starting in late May, and into the first week of June when Ethereum really exploded onto the scene. It was being mined the hell out of behind the scenes, but it was in the middle of June when it felt like it was absolutely everywhere.

GPU shortages across the world, with both reactional effects to AMD and NVIDIA as well as eBay sellers, retailers, wholesalers, and even the second-hand market. Older graphics cards from AMD began doubling or tripling in price in the second-hand market, with the Radeon R9 295X2 selling for nearly $1000.

This drove people to buy Radeon R9 290/390 series cards, on top of people stripping shelves bare of the Polaris-based Radeon RX 470, RX 480, RX 570, and RX 580. Both variants were depleted with 4GB and 8GB models selling out, and then NVIDIA felt the effects with GTX 1060s becoming super popular overnight, selling out just as quickly as retailers began cashing in on the Ethereum mining boom.

Global GPU Shortages

It's Not Just GPUs

It wasn't long until the higher-end GTX 1070s began leaping in price, before also flying off shelves. This trickle effect was hitting other markets that weren't being talked about, including high-end PSUs. I had a near impossible time of finding high-end PSUs, with 1000W+ units selling out all over the place. There were a few high-end 850W units left, but the numbers were thinning.

On eBay, there were plenty of mining-oriented products that began enjoying the Ethereum rush, including PCIe x1 to x16 risers, steel frames for multi-GPU rigs, and more.

Please Don't Buy Hardware For Mining Now

Now that there are virtually no Radeon cards on the market, and most of NVIDIA's mid-range GeForce cards are extinct, the difficulty of mining Ethereum has skyrocketed. Six weeks ago you could make a very nice money mining Ethereum, but the difficulty of mining it continues to swell - and it is even faster now that there are thousands of new miners joining pools across the world.

The current price on graphics cards is f***ing ridiculous, with retailers and etailers cashing in on the feverish demand on AMD and NVIDIA hardware. It's not right, and I hate it beyond words. A large reason for this is that I worked in IT retail for ten years before I changed careers and started writing for TweakTown.

I used to sell the very hardware that I now review for a living and work with every day, and I rode waves of random popular spikes in sales. The whole 'can it run Crysis' happened while I worked in IT sales, and we couldn't get enough graphics cards in before they were flying off the shelves.

This global GPU shortage is unprecedented.

It hasn't happened at this scale before, and we're standing right under a gigantic bubble. It might seem fine now, but NVIDIA and AMD can't get enough cards onto the market, and even if they could, this pent up demand for Radeon RX 400/500 series and GeForce GTX 10 series cards will die. It will go down. This is a guarantee. Ethereum mining has teased people with the ability to make a lot of money very quickly from their homes, using consumer level hardware.

When mining Bitcoin was a 'thing' before it changed over to requiring ASIC specific hardware, we went through a similar wave, but it was nowhere near as all-consuming as the Ethereum wave. This new Ethereum wave feels like Pokemon GO, where it was everywhere for weeks - ramping up to around two months.

Then all of the sudden, Pokemon GO wasn't infused into our lives anymore and filling our social media accounts and headlines across the world. These waves swell very high in a short amount of time, but they eventually go down, and everything returns to normal... except this time it's not going to be that easy.

We're At The Peak, Which Means...

The Ride Is Nearly Over

Revenue is dropping in massive chunks every few days, so while you would've been making a steady amount of money a few weeks ago, that has dropped significantly.

A single graphics card like the Radeon RX 580 or GTX 1070 was making you over $5 per day nearly a month ago, that amount has nearly halved. If you had purchased six new RX 580s for let's say $350 a month ago, you could've been making somewhere in the vicinity of $900 over the month, with the cards paying for themselves in just over two months.

Not bad, right?! You can see why people wanted to jump right into the deep end with Ethereum mining, with some people spending thousands of dollars, while others spent hundreds of thousands of dollars. There are serious cryptocurrency mines in Russia and China with millions of dollars of investment, churning out more than you could ever wish for at home.

The DAG continues to expand with Ethereum mining, and with the drive towards the sky in difficulty, the revenue per day continues to drop. Even for my mining operation here with 60 graphics cards spread across 15 systems, I've seen a 30% drop in the last couple of weeks, but it has nearly halved in the last month. Boo.

HOLD Your Digital Currency?

To Hold, Or Not To Hold

Now, this is something that's up to you... to hold what you've got, or not. Personally, I'm holding onto what I've got, but not just in the hopes of a possible rise in the price of Ethereum. I'm holding it because I genuinely believe in the future of digital currency. I believe it is the future, and we're getting a tease of it now before it becomes an integral part of our everyday lives.

I've diversified into holding other currencies as well, with a spread of Bitcoin, Litecoin, Zcash, Ethereum, and Siacoin. I don't own much of Bitcoin ($10 worth right now) - but I traded $500 worth of the Ethereum that I mined a few weeks ago into Siacoin. If it were to go up from its current price of $0.01 to even $0.20, that's a 20x increase. It might not happen, but there were millions of people who said the same words about Bitcoin years ago... and look at where we are now.

Put Your Seatbelt On

Any minor crash of Ethereum could spiral out of control at least temporarily, and when the DAG increases to the point of squeezing out anyone with less than 20-30 graphics cards, it will be fruitless to mine Ethereum on even a 6-way GPU system. I've got friends who are either building, have just bought, or are upgrading their PCs for mining. I wouldn't recommend getting into Ethereum mining right now, as the ROI isn't there - and it won't be coming back.

Everything is changing so quickly, with today being a day of red across the entire digital currency field. Give it another two weeks, and you're going to see Ethereum mining dead for anyone with less than ten cards, and another 4-6 weeks before the rest are squeezed out.

Many are already diving away from ETH mining and into either Zcash or alt-coins that might spike up with others jumping away from Ethereum. This will be a snowball effect, something that will continue to expand throughout the week.

Second Hand Sales Will Be MASSIVE

Second Hand Market

There might not be many Radeon and GeForce graphics cards right now, but the flood of GPUs that will hit the second-hand market in the next couple of weeks is going to be like nothing we've ever seen before. This is going to be a great thing for consumers, and either a regrettable thing for the ex-miners, or a break even point as they leave the digital currency mining game.

AMD and NVIDIA will no longer have gamers mad at miners because there's a lack of stock, because stock will get replenished over the coming weeks and most likely won't get to the point of where it has been for the last few weeks.

This doesn't mean there won't be demand, but the coming DAG increase will push so many new people out of the market, they'll give up very quickly once they realize their revenue and profits are dropping rapidly... making it more expensive to run the mining system/s with larger power bills to run it all 24/7.

The mining-specific cards will be useless in the second-hand market with 90-day warranties and no display connectors; they will only be a good buy for fellow miners who want cheap mining-specific cards. But if these GTX 1060/RX 580 cards are selling for $249 and are let's say two months old at the time of sale, they'd have to be something under $100 before most people would prepare to buy them.

The Next 30 Days

The Canary Isn't Dead, Yet

I don't see cryptocurrency mining going anywhere, but it is going to be squeezed out of the hands of mainstream use, and into the realm of more serious miners. Mining won't die, but it will transform. For anyone who is just getting into mining, you might not have looked at some of the available charts that show the DAG for Ethereum is ramping up quickly. Let's take a look at the Ethereum difficulty chart, which is available on CoinWarz.

This is over the last 30 days, and you can see here that we're looking at nearly double the difficulty of mining Ethereum, the main driver behind the amount of Ether you mine each month dropping significantly.

Here we have the last week, where you can see that each wave is getting bigger and bigger, and lasting long before it bounces back down.

If we then take a look at the price of Ethereum over the last month, you can see it reached those massive highs of $400 from a month ago, to the slump of under $300 just before June 16. It really went down in the end of June to nearly $200 before recovering to $300+ a few days later, and is now below $250 once again and coming down still.

With this in mind, please take care in the mine... it's an exciting, but very volatile place.