Opinion The Mining Industry is Going Strong in 2018

The Mining Industry is Going Strong in 2018

February 10, 2018

The recent slump in the crypto market managed to erase a huge amount of money. The same fall was so big and rapid that many went on to declare that no cryptocurrency would ever completely recover from it. It was a fall that everyone in the crypto skeptic community just waited for, the biggest impact to the crypto market since the Mt. Gox and the one from which there would be no coming back.

For the skeptics, it was the needle in the bubble that was a long time coming and the mainstream news did not waste time forwarding this message. However, the downturn lasted for some time, before it stopped. Then, the swing up began and it moved the charts northwards.

Now, it looks like the slump is over and the crypto market is moving back with strong short-term gains. The consumer confidence seems to be back as well with the doomsday news slightly losing steam. If history is anything to go by with, the same news will dry up as bitcoin hits $10k again and ethereum gas over the $1000 marks.

But, while many will see this as an important news (which it will not be, except from a psychological perspective), there is a much bigger gauge of the crypto market health. This gauge is related to the mining industry and its expansion plans for 2018. If these are anything relevant for the crypto ecosystem, it looks like the bounce of the market will occur sooner than expected.

Nvidia GPU Sales

The world-renowned producer of GPU cards, Nvidia, came out with its sales data for Q4 related to cryptocurrency mining. In an earnings call, the company’s CFO Colette Kress stated that the demand for their products remained high during this period.

Kress said that the company’s earnings for the Q4 of 2017 reached $2.9 billion. This sum represents a 34% jump compared to the same period a year before. For a hardware company, the same amounts to an incredible success.

However, Kress did underline that the demand that the company saw in the previous months could easily shift. This and the entire boost in the GPU market is directly tied to the fortunes that can (or cannot) be made on the cryptocurrency market.

A Hard to Quantify Process

Kress also touched upon the fact that the process of mining and its demand for GPUs is hard to quantify. The company clearly sees an increase in their profits and these come in the time of the mining boom, but there is no way to map out the precise connection between these two.

This is why NVidia remains committed to the demands that are coming from gaming, which covers everything from individual customers to eSports leagues that purchase hundreds of gaming rigs. Kress also stated that the cryptocurrency trends remain very volatile, so the company needs to rely on its more secure sources of demand.

Yet, the company leadership, which includes its CEO, has been bullish on the prospect of capitalizing on the cryptocurrency mining. At the same time, Nvidia stated that their expectations about the mining are limited, with the company seeing this demand as a small part of their overall earnings.

Still, the analysts are certain that the company did not have plans for a profit increase on this scale that came from the mining of cryptocurrencies. Unlike their plans for the development of the gaming GPU offer, this level of demand for the crypto activity most likely took the company by complete surprise.

The Step-by-Step History of Mining

Companies across the board of the IT sector are eyeing the possibility of entering the crypto mining market. Recently, the Long Blockchain Company served to show that this process is not without its ups and downs, but there is no doubt that the industry is on the upswing. Yet, the industry itself is as old as the bitcoin system that really started it all.

At the beginning of the bitcoin network, for example, which is today used for anything from buying goods and services to betting using BTC, the mining operations took place with individuals. At that moment, the network allowed for relatively low difficulty mining, which could be completed using laptops or regular PC rigs.

As the difficulty went up, individuals began creating custom GPU-based rigs designed only for mining. Around this time, the first mining companies came about, forming in pools that would distribute the hashing potential of what is basically a mining farm. These quickly started popping up in China thanks to cheap utilities and an affordable, but well-trained workforce. The mining operation grew so big that at one point, at least 70% of the total hashing potential was located in a single nation.

Now, with the rise of the altcoin scene, especially ethereum as the second big network, the mining dynamic has changed. Many companies right now believe that the same dynamic could continue years if not decades into the future.

Developing Mining Plans

It seems that today, the mining sector is developing in two polar opposites. At one end, companies are looking to create mines that would be able to actively switch between networks based on the profitability of their coins. The same companies are also looking to take down their cost by choosing cold places that can be used for free cooling, combined with energy-rich locations that offer accessible utility bills.

On the other side, cities and regions are trying to devise projects that would bring crypto mining investment to their area. Quebec is a perfect example of one of those places. Others are doing the same while trying to provide both factors (energy bills and cooling) or at least one of the potential investors.

All of this points towards a vibrant industry that is supported by a growing ecosystem. The same system includes a level of volatility when it comes to the price of the actual cryptocurrency coins, but the mining ventures appear to be determined to not let that hamper their development plans.

Ultimately, the growth of the mining projects in terms of number and the scale of individual mines shows that the doomsayers once again appear to be wrong about the cryptocurrency setup.