According to a document filed by GMO Internet Group, it has been confirmed that the Japan-based internet giant has decided to shut down its crypto-mining division. Through the report, the company confirmed that it would no longer “develop, manufacture and sell” mining hardware, citing extraordinary losses for this decision.
The document, which was titled ‘Recording Extraordinary Loss Related to The Cryptocurrency Mining Business Restructuring,’ highlighted the fact that GMOs Bitcoin mining division drew high amounts of losses in the fourth quarter of 2018.
Going further, the document notes:
“After taking into consideration changes in the current business environment, the Company expects that it is difficult to recover the carrying amounts of the in-house-mining-related business assets, and therefore, it has been decided to record an extraordinary loss.”
GMO launched its in-house mining division in December 2017 at the height of bitcoin’s bull run. The company chose to operate through subsidiaries, two Switzerland-based corporations, and a mining center.
Analysis of the document showed that electricity costs had been a major factor affecting its performance. While these electricity costs have been sustainably high, the dip in the value of the coins being mined has made it increasingly difficult for the company to offset the imbalance. According to the document, GMO will look into moving the Bitcoin mining business to a location where they would be able to mitigate the effects of these electricity costs.
As a means of alleviating this, the company said it would “relocate the mining center to a region that will allow us to secure cleaner and less expensive power supply.”
In total, GMO’s consolidated losses for Q4 2018 amounted to 35.5 billion Yen (the equivalent of $320 million), while the unconsolidated losses see the figures rise to 38 billion Yen ($334.5 million).
The news of the shutdown is particularly shocking, as the company reported favorable performances from its cryptocurrency mining division in Q3 2018. These performances included hardware sales, and overall, the cryptocurrency division of the company reported a total profit of 2.6 billion Yen ($22.8 million) during the third quarter.
GMO reported that despite the losses recorded, the “financial integrity” of the company remains intact and has not been affected.”
With GMO’s most recent announcement, the company is now the latest casualty the current bear market. Earlier this month, it was reported that Nvidia, a manufacturer of GPUs and crypto mining hardware, was the worst performer on the S&P 500 for the fourth quarter of 2018, as the continued drop in cryptocurrency prices has affected the company’s profits and sales.
During this quarter, Nvidia’s stock was massively dumped by investors who feared the effects of the bear market, resulting in a 54 percent cut in the price of the company’s stock. AMD, another crypto GPU manufacturer, has seen the price of its Radeon RX580 GRP slump by about 67% since February. The GPU, which reached an all-time high price of $550 per unit in February (arguably when the drop in crypto prices started), has been affected by the downturn in the crypto market. Interest in crypto mining has significantly reduced since then, resulting in a plunge in GPU sales. In its financial issues report, AMD remarked “negligible” crypto-related sales for Q3 2018.
In November, the cryptocurrency market capitalization dropped by over $100 billion. In that time, it was reported that cryptocurrency miners in China were massively selling off their mining hardware as a means of saving their businesses and abating the effects of the losses which they had incurred. As the crypto mining business continued to drop in profitability many of these miners ended up losing their businesses.