The Last Few Days Have Been CRAZY
This Was Always Going To Happen
For the last six weeks, cryptocurrency has been all over the place like an infection... currency markets, GPU mining, global GPU shortages, and more. It's a volatile market as it's open 24/7 and doesn't close like regular FIAT-based trading markets. The latest trend is Ethereum mining (for the most part, anyway) and the global GPU shortage of the last 5-6 weeks.
Ethereum mining and its impending DAG increase (the difficulty in which Ethereum mining is set at) began a huge upwards trend a few days ago, its biggest rise in difficulty... ever. The downwards trend of the price of Ethereum didn't help, as it created the perfect storm for the temporary tank in Ethereum ROI from mining. For anyone who has just purchased, or is in the process of purchasing PC hardware (GPUs, PSUs, risers, etc.) is paying heavily inflated prices for something that was in the headlines a month ago as a great way to make money.
The difficulty increase and drop in the price of Ethereum has slapped us a few times across the face, in what feels like every day. I wrote an article that did amazingly well for us, as it was written at the peak of this as it began to really scale right up in difficulty, and down with price. Buying hardware at a huge inflated premium isn't good, with wholesalers, retailers, and everyone in between making a quick buck on the global GPU shortage.
If you had purchased 10 x Radeon RX 580s before the beginning of June for Ethereum mining, you'd be making some damn good money - somewhere in the vicinity of $2500+ per month before electricity (and paying off the hardware). This meant you could pay the cards off pretty damn quickly before the price of Ethereum began to fall, and the DAG increased by leaps and bounds. This was the issue... just as Ethereum mining became 'mainstream,' the fevered need for RX 400/500 series cards spilled into second-hand markets, into the GTX 1060, and even GTX 1070.
Dat DAG Difficulty, Tho: WHOA
Difficulty Increase = Insane Last 72 Hours
The article I wrote came at the perfect time, but the last 72 hours has been an incredibly bumpy one. First, the difficulty of Ethereum mining has hit new highs... just take a look at this chart:
Here's the last month, you can see larger increases in difficulty between June 20-22, and then smaller bumps towards the end of June. But it was in the first ten days of July where the DAG increased in larger chunks before falling, and then you can see the ramp up towards the last 72 hours.
Starting on the night of July 2, the DAG increased in waves throughout the first week of July. You can see this on July 5/6/7/8/9 before the massive mountain-like increase on July 11 to 1.2T. It hasn't jumped by 20% before, but that increase put a major squeeze on small time miners, and even more so on the ones with just a handful of cards.
Ethereum Price Tanks
Ethereum Price Drops Below $180 USD
If you got into Ethereum in January, it was just $1... but most people got into a few months too late as by the time April rolled around it was already trading above $50. The next wave of Ethereum price increases arrived in the second half of May, where it not only breached $100 but $200 and on its way a month later to $393.
If we look at the last month of Ethereum pricing, it hit its peak of $393.03 on June 13 - which was right in the middle of the frenzy of Ethereum mining and global GPU shortages. This high didn't last long, as it dropped to below $300 just two days later on June 15, before recovering up past $350 in the next 48 hours.
Earlier this month the price of Ethereum was steady at $275 before it began its slow descent into miners' hell.
The last three days have been horrible, but it stabilized at $250 for at least 48 hours, before beginning its new lows of sub $200... and even sub $175 at one point.
At the time of writing, Ethereum had somewhat stabilized at $185... but I think the drops in price are far from over. An hour after finishing this article, the price began reaching $195... showing that it is still very volatile, and needs constant eyes on it to watch its price. I will edit this as the price continues to change.
Problem Is, It's Not Just Ethereum That Tanked
All Digital Currency Is Hurting
This isn't all about Ethereum, but it feels like it is at times. We have to remember other major digital currencies are failing right now. The prices of Bitcoin have come down 10% in the last 24 hours but look at the declines in both Ethereum and Zcash - the latter dropping 29% in the last 24 hours, which is tragic.
You can see this chart is all red and features most of the largest digital currency like Bitcoin, Ethereum, Zcash, Dogecoin, and others.
If we look at the major coins that we're talking about here, this is Bitcoin, Litecoin, Ethereum, Dash, Zcash, and Ethereum Classic. All red.
Paint The Town Red
Why all the red? We don't know. There have been no major shifts in the digital currency market, no new coins or financial doom reports. It has been mostly positive with more companies pushing into the cryptocurrency world, but the prices are falling through the floor, and not many seem to be talking about.
Zcash dropping 30% overnight should be ringing alarm bells everywhere, the same goes for Ethereum and its 21% dive, or Litecoin and its 12% drop... heck, Bitcoin is down 9% and no one has flinched.
What To Expect This Week... Maybe
The last month has shown us the peaks of Ethereum, but for many thousands of people, it has devastated them with new lows. Hitting under $200 was a hard punch to your mining guts, especially those who have sunk thousands of dollars into new hardware or many mining rigs worth of hardware, for a quick return on investment. This isn't going to happen quickly, and you might be months and maybe even years away from profit if you've spent tens of thousands like some.
I'm no cryptocurrency expert, but I can provide some theory based on my six-week deep dive into cryptocurrency, the financial market beside it, the technology driving it, and the consumer-driven side of things from the GPU market. First thing, global GPU shortages are unheard of at this scale, and this is mostly due to the massive demand that Ethereum and subsequent altcoins like Zcash, Siacoin, etc. We are in a new world of 'you can make money at home!' ads that appear all over the internet, but this time it's for real, and you can use your gaming PC! Say what?!
This led to a huge surge in GPU sales, leading to massive price rises on many different series of cards, even spreading into the second-hand market. Ethereum rode this massive wave of interest, with many people getting in high - but now the price is so low that if you bought at this price a few months ago and let the new surge of interest drive up to $393, you've doubled your money. All of the miners who made money in the last six weeks just saw their profits disappear in a poof of imaginary cryptocurrency thin air.
Could we see below $150 in the next few days? At this rate, yes... but what about below $100? These are the questions burning the ears of Ethereum miners and ETH holders right now. What about $50? Is this the great crash of Ethereum? Possibly. Will it rebound? That's something I have much more confidence in.
Wherever the end is, I think we'll hit it and begin bouncing back up shortly. We might not skyrocket to $393 again right away, but over the next few months, and even the long-term outlook, we could see big gains. Ethereum is much more than 'just a cryptocurrency,' remember.
The Month Ahead, For Miners
Some Are Looking For Exits
There would be some people who have invested real money, hoping for a meteoric (short term) rise... and that's what they'll do no matter what someone tells them. Those that are in it for the long-term (years) are not going to be bothered by these, while major, sharp declines in value. They will hold their digital currency for years without worrying, hoping for the longer slow burn scenario as Bitcoin has experienced.
For new miners, you're going to be looking at every single available exit. This is something I warned about in my previous article on Ethereum, that new miners who might have invested $10,000+, where a few weeks ago they were making $4000+ a month from their systems at a high point, are going to be finding themselves in a sticky situation.
Not only has the revenue per month dropped drastically, but the difficulty has increased correspondingly, making what you mine twice as hard, for less than half of what Ethereum was valued at when you started.
For those with bigger mining farms dedicated to Ethereum, I would definitely recommend switching your mining over to Zcash or something similar. Ethereum mining for miners with less than ten graphics cards just became incredibly hard to justify... but better for bigger farms as they have many more GPUs that outweigh the difficulty.
Even then, larger farm owners will want to switch out for something more profitable, anyway, as the difficulty of Ethereum mining is tragically hard right now.
For now, we'll see how the rest of the week pans out. Right now, there's so much volatility because the cryptocurrency market never closes, ever. It's a 24/7 market compared to the daily stock trading market that closes and reopens. Digital currency is constantly evolving in mining, difficulty, and price... 24 hours per day, 7 days a week, 365 days a year. It never stops, and it never will. This makes it incredibly unpredictable.
But that's half the excitement of it, right?
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