Morgan Stanley: Ethereum 2.0 Launch May Reduce Demand For GPUs

A new report from Morgan Stanley has revealed that if Ethereum switches to a proof-of-stake (PoS) consensus as planned, it will do away with the need for miners, reducing the demand for graphics processing units (GPUs), and significantly lower energy needs.

Ethereum Miners Could Find Alternatives, Says Morgan Stanley

GPU usage may decrease if Ethereum switches from a proof-of-work method to a proof-of-stake one through the Merge of the Beacon Chain with the ETH mainnet.

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Sheena Shah, an equity strategist at Morgan Stanley, says that the less energy-intensive proof-of-stake will result in a decline in the market for GPU miners. The report read:

“Bitcoin and Ethereum currently require powerful computers for the mining process and consume a lot of energy which governments and regulators are increasingly concerned over. If Ethereum moves to using Proof-of-Stake (PoS) it will eliminate the need for miners (reducing demand for GPUs) and drastically reduce energy requirements.”

The bank claimed that over the previous 18 months, crypto mining has significantly impacted the gaming graphics business, driving an expected 14% of revenue in 2021 while “significantly contributing to a major graphic shortage, which boosted overall mix and pricing.”

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ETH/USD trades at $1,200. Source: TradingView

The report stated that although GPU demand might decrease, chip manufacturer Nvidia is less dependent on the demand for cryptocurrency mining than it was in 2017–19.

The bank also observed that in the first half of the year, demand for graphics cards from crypto mining, which contributed to the shortfall, started to decline. This was as a result of the market decline in cryptocurrencies.

However, it was predicted in a different analysis by Bloomberg in mid-June that Ethereum miners would likely continue mining until the Merge takes place later this year. Additionally, some miners thought about switching their Ethereum miners to mine Revencoin or Ethereum Classic.

GPU Manufacturers Say They Have Managed Downsides

Nvidia and AMD (AMD) have both maintained that they have reduced the likelihood of cryptocurrency-related downside scenarios, but Morgan Stanley believes that a decline in gaming GPU prices will occur in the first quarter of 2023. This will be caused by a number of reasons, including a decline in work-from-home activity, the migration of cryptocurrencies to point-of-sale systems, and “tough sequential comps after channel inventory rebuild in 2022,” according to the report.

The bank stated that since it is currently unprofitable for all of these computers to mine other cryptocurrencies after the Merge, Ethereum miners will likely sell their used GPU equipment. The bank also stated that since net ether (ETH) supply is anticipated to decline after the Merge and may even turn contractionary, it is unlikely that all of the miners will switch to staking.

The report also stated that switching to PoS will not address Ethereum’s scalability issues, including its poor transaction throughput or transaction costs.

Related reading | Ethereum Hashrate Plunges Over 10% As Mining Profitability Drops

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