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Depressed cryptocurrency prices are having a greater than expected impact on mining businesses. This is most apparent in hardware manufacturers, along with the stock price of publicly traded miners.

Hardware, specifically GPUs and ASICs, were selling for a large premium (sometimes 200%+) at the end of last year and into 2018. There was simply more demand than supply. Manufacturers saw the increasing demand and ramped up production. As crypto prices dropped through Q1 and Q2 2018, mining became less profitable and retail interest waned.

The market has now inverted and there is a surplus of hardware, which is being sold at discounted prices. A great example is Bitmain’s S9 Antminers, widely considered the most popular Bitcoin mining hardware. Earlier this year, Bitmain was selling one machine for ~$2,500 and secondary sales were fetching as much as $4,500. Today, the same S9 Antminer is selling for ~$600.

Additionally, Bitmain continues to offer discount coupons to larger customers in an effort to offload excess inventory. The pain isn’t only being felt by Bitmain though. AMD and NVIDIA, two of the largest GPU manufacturers, have either missed earning expectations or commented on lower projections based on decreased demand.

Hardware manufacturers aren’t the only companies feeling the pain though. Publicly traded mining companies are getting punished by investors. Hive Blockchain (TSX) is trading around $0.80 per share, down from an all-time high of $5.37 in November. Hut 8 Mining (TSX) has a shorter history, but is currently trading at $2.75, which is down from the $5.28 all-time high. Lastly, MTG Capital peaked at $7.10 in December and is now trading at $0.72 per share.

Stock prices obviously don’t tell the whole story. Each company has continued to invest in infrastructure during the bear market. They are constantly improving their capacity, and in turn, their financial outlook. Unfortunately, stock prices appear to follow public sentiment for the crypto markets, rather than the actual value of the respective businesses.

Although hardware manufacturers and publicly traded miners are struggling, I don’t anticipate this to last forever. As the crypto markets recover, we should see a resurgence of these infrastructure companies. They tend to suffer more than they should on the downside, but benefit more than they should on the upside.

Remember, selling picks and shovels during the Gold Rush was a great business.

THE RUNDOWN:

Ripple hires Facebook payments exec and names new CTO: Ripple announced the hiring of Kahina Van Dyke, a banking industry veteran who recently worked as Facebook’s global payments director, as its new senior vice president of business and corporate development. The company also said head cryptographer, David Schwartz, would assume the role of chief technology officer. Read more.

Litecoin price spikes above $80 on bank acquisition news: The price of litecoin spiked to $81 on Wednesday amid notable news for the cryptocurrency often called the silver to bitcoin's gold. The world's sixth-largest cryptocurrency by market value looks to have picked up a bid on reports that the Litecoin Foundation has acquired a 9.9 percent stake in Germany's WEG Bank through a new partnership with crypto-to-fiat payments provider TokenPay. Read more.

Riyadh municipality partners with IBM to develop blockchain for gov services: Riyadh Municipality, Saudi Arabia, has partnered with IBM to jointly develop a strategy to streamline government services and transactions on а blockchain. The move was made in accordance with an authoritative decision of the Government of Saudi Arabia to work on improving the quality of municipal services for customers and integrate leading technologies into services as part of the Saudi Vision 2030 program. Read more.

South Korean regulators to introduce new rules for crypto and blockchain: South Korean legislators have revealed drafts of bills intended to develop rules on cryptocurrencies, initial coin offerings, and blockchain technology. Representative Song Hee-kyung of the leading opposition Liberty Party Korea has called for regulations on trading platforms in order to prevent money laundering, cybercrimes and personal data leaks. Read more.

India may not ban cryptocurrencies after all: India is not going to put a blanket ban on digital currencies, but rather treat them as commodities. A Finance Ministry panel has ordered a study on cryptocurrencies, which may suggest that the government would treat them as commodities. A senior government official with knowledge of the panel’s discussion said they doubt the government aims to ban cryptocurrencies. Read more.

TenX co-founder still ‘quite confident’ Bitcoin can hit $60,000 this year: Julian Hosp, co-founder of TenX, sees bitcoin potentially hitting $60,000 even though the cryptocurrency is trading some 67 percent below its near-$20,000 December highs. Read more.