First Mover Asia: Crypto Concerns Weigh on Taiwan PC Component Makers’ Stocks; Bitcoin Springs to 3-Month High

Good morning. Here’s what’s happening:

Prices: Bitcoin soars to three-month high; other major cryptos also gain.

Insights: With Ethereum’s transition to proof-of-stake and a decline in pricing for graphics cards, the share prices of major manufacturers of PC components have fallen.

Technician’s take: Seasonal strength could keep buyers active within BTC’s year-long price range.

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Bitcoin (BTC): $46,690 +5.1%

Ether (ETH): $3,271 +4.3%

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Bitcoin soars past $46.8K

A Bitcoin spring was in the air on Sunday.

The largest cryptocurrency by market capitalization shot past $46,800 at one point, rising over 4% over one two-hour period to reach a three-month high. Bitcoin has gained over 12% since last Sunday after climbing six consecutive days, although it remains off its $47,200 starting point in 2022.

Ether and most other major cryptos were also blooming. The second largest crypto by market cap followed a similar pattern to bitcoin on Sunday and was changing hands at over $3,270, its highest level since early February. Solana, Cardano and Avalanche, among other altcoins were well into the green. Popular meme coins for Dogecoin and Shiba Inu, were up about 6% and 3.4%, respectively.

Trading was accelerating after weeks of low volumes.

“Trading volumes are up as buyers try to turn this resistance line into support and take further steps up in pricing,” Joe DiPasquale, the CEO of fund manager BitBull Capital, wrote to CoinDesk, but added: “If we don’t remain above this line, we will consolidate lower than here.”

DiPasquale said that Bitcoin had had “a strong week, especially given the quarterly options expiry” on Friday and noted that Bitcoin had “shown resilience” following the Federal Reserve’s decision last week to raise interest rates and the continued escalation of Russia’s invasion of Ukraine with its economic fallout.

But he was also cautious in his appraisal of the coming days. “While market participants are starting to get bullish and the fear and greed index is at neutral, BTC bulls will want to see the price consolidating above $46,000 for further continuation,” he said. “The coming week is also important as it marks the end of the quarter and we could see increased volatility after that.”

S&P 500: 4,543 +0.5%

DJIA: 34,861 +0.4%

Nasdaq: 14,169 -0.1%

Gold: $1,958 -.06%

Taiwan’s PC component makers remain profitable, but crypto concerns are weighing on their stocks

Shares of Asus, Gigabyte and MSI, Taiwan-based component makers that produce graphics cards are down year to date as the market prices in slackening demand for their graphics cards.

Preliminary data shows a massive drop in pricing for graphics cards as Ethereum’s transition to proof-of-stake nears, with some prices dropping by over 50%. At electronics markets in China, used GPUs are showing up by the crate load and new ones aren’t moving like they used to leading to an excess of inventory.

As a refresher, proof-of-stake puts the onus on securing the blockchain to those that have a large treasury. By staking their coins – committing them to a bond-like savings structure – these coins become validators for network transitions. Proof-of-work, in contrast, relies on miners working on increasingly difficult mathematical problems to mine the coins and thus secure the network.

GPUs and mining

Graphics Processing Units (GPU), the brain inside a graphics card, were ideal for this as the processor inside them was designed to compute mathematical equations at a massively parallel scale.

Nvidia (NVDA) first learned the graphics cards built for gaming can be used for general-purpose computing in the mid-2000s, perfecting the method in the early 2010s with something called general-purpose computing on graphics processing units, or GPGPU compute.

The ability to do mathematical computations with massive parallelism was great for making photorealistic graphics in games, but more valuable to bring on the big data revolution. Nvidia and its competitor AMD (AMD) make specialized GPUs that are used in server farms, and also advanced workstations for research.

Researchers were able to quickly sequence the COVID-19 virus because of the computing power available to them thanks to the advent of GPGPU compute, which didn’t exist during the SARS pandemic.

Miners gobbled up cards

While Nvidia and AMD design the GPUs, they rely on partners to integrate them into boards that fit into computers, called add-in boards.

The majority of these partners are based in Taiwan, and are brands recognizable to computer enthusiasts such as Asus, Gigabyte or MSI.

While Asus has a comprehensive lineup of PCs, notebooks, tablets and phones, Gigabyte and MSI rely more on selling individual components like graphics cards and motherboards.

And their stock prices this year reflect this.

Year to date, Gigabyte and MSI are both down 16%. At the same time, Asus is roughly flat. Data from market research house IDC shows PC shipments are still the best they’ve been in a decade, but they’ve slowed compared to the halcyon days of the height of the pandemic, when everyone needed new computers to accommodate families working and attending school at home.

But that’s not to say that Gigabyte and MSI are doing poorly.

Since 2020, Gigabyte is up over 150% while Asus is up 60% and MSI up 52%. This connects to key events: the coronavirus pandemic, which caused the PC supercycle, and the crypto bull run of 2020-2021 that drove up demand for GPUs to mine ether (ETH).

Now compare this to the dog days of 2014-2015 when crypto wasn’t really a thing, and incremental advances in graphics technology meant that gamers didn’t need to upgrade their PCs. Gigabyte posted sub-$100 million yearly profits, and MSI was as equally hard hit as the two were unable to move as many graphics cards and motherboards as they would have liked.

To be sure, there’s still lots going on at these component makers. MSI is still expecting revenue for 2022 to come in at a record high, though the slowing GPU sales will sting. All this isn’t a bad thing. Gamers, the intended audience for these GPUs, will be able to now buy them at a price close to MSRP — a feat that’s been impossible for years.

Bitcoin (BTC) appears to be overbought on intraday charts, which typically leads to a short-term pullback in price. The cryptocurrency faces initial resistance near $46,000, which is the top of a three-month long trading range. Still, support between $40,000-$42,000 could stabilize pullbacks.

On the weekly chart, BTC established a higher price low relative to the June 2021 bottom around $28,800. The latest cycle low was achieved this year on Jan. 24 at $33,100, indicating renewed buying strength. Further, momentum signals are on the verge of turning positive, which could support a short-term relief rally.

Stronger resistance is seen at $50,996, which is a 50% retracement of the prior downtrend. At that point, BTC’s rally could stall, similar to what occurred in September 2021. This time, however, seasonal strength between April and May could keep buyers active, albeit within a year-long trading range.

On the monthly chart, momentum signals remain negative. That means upside is limited because of strong overhead resistance emanating from the April and November price peaks.

7 p.m. HKT/SGT(11 a.m. UTC): Speech by Bank of England Governor Andrew Bailey

8:30 p.m. HKT/SGT(12:30 p.m. UTC): U.S. trade balance (Feb. preliminary)

8:30 p.m. HKT/SGT(UTC): U.S. wholesale inventories (Feb. preliminary)

Terraform Labs CEO Do Kwon revealed plans to increase UST’s bitcoin reserve to $3 billion. Darren Lim of blockchain data firm Nansen provided his analysis on the transaction activity of the luna token. CoinDesk’s Nikhilesh De shared details of India’s 30% crypto tax law and the EU’s MiCA bill. Plus, Fernando Martinez of OSL provided crypto markets and bitcoin price analysis.

Other voices: 3 crypto analysts explain why bitcoin could be on the verge of a ‘major breakout’ — and why ethereum’s Kiln testnet merge last week could ultimately lead to an ‘inevitable speculative bounce in price’ (Business Insider)

“While Terraform Labs is not exactly a bank, it is issuing its own digital cash to make paying for things easier – and it’s about to be backed by bitcoin. This is a big deal for anyone with a vested interest in the Bitcoin system, even if you vehemently reject altcoins (non-bitcoin cryptos; there is another, less flattering term for these).” (CoinDesk Research Analyst George Kaloudis) … “The average cost of gas in the United States hit a record high on March 11 at $4.33 per gallon, according to AAA. Although that number has since declined to an average of $4.24 per gallon, it is still 18 percent higher than it was last month and 48 percent more than it was a year ago.” (The New York Times)