More than a year after launching an in-house mining business, Japanese internet conglomerate GMO Internet has announced that it will no longer, develop, manufacture, or sell cryptocurrency mining equipment.
In a statement, the Japanese tech firm disclosed that the decision was prompted by challenging business conditions which resulted in an “extraordinary” consolidated quarterly loss totaling 35.5 billion JPY (approximately US$320 million).
According to GMO Internet, the firm’s mining business has been made untenable by the fall in cryptocurrency prices which consequently led to a drop in demand for the mining rigs. In an increasingly competitive environment, the Japanese tech firm was forced to cut the selling prices of the mining machines, a move that resulted in reduced profitability.
However, the reduced prices did not spur more sales, and GMO Internet’s mining share failed to rise as expected as a result of an increase in the global hash rate:
After taking into consideration changes in the current business environment, the Company expects that it is difficult to recover the cryptocurrency-mining-business-related assets through selling mining machines, so the Company has decided to stop the development, manufacture, and sales of mining machines, thereby recording an extraordinary loss.
GMO Internet initially announced its foray into the cryptocurrency mining business last year in September, as CCN reported. The firm’s CEO later boasted that it would supplant Bitmain, the world’s largest cryptocurrency mining firm.
While GMO Internet will cease developing and manufacturing cryptocurrency mining rigs, it will continue with the in-house mining business. With electricity compromising a majority of the operating expenses, the Japanese internet conglomerate will move the mining operation to a locality with cheaper power supply. GMO Internet’s in-house mining business also recorded an impairment loss of 11.5 billion Japanese yen (approximately US$104 million).
Another manufacturer of mining rigs who has been negatively impacted by the downturn in cryptocurrency prices is the Jihan Wu-led Bitmain. As CCN reported earlier this week, the bitcoin mining giant intends to lay off nearly 50% of its employees. Preliminary reports indicated that the employees who will be laid off had been served with a one-week notice.
Bitmain: Bitcoin Mining Giant to Sack 50% of Its Workforce https://t.co/ldRkjjEfSs
— CCN (@CryptoCoinsNews) December 24, 2018
Earlier this month, Bitmain also reportedly shut down a development center it had established in Israel known as Bitmaintech. Estimated to be 23, none of the employees at the center including the head, Gadi Glikberg, were spared from the layoffs.
As noted by CCN, the decision by Bitmain to cut costs by scaling back could have been prompted by the losses it suffered after the “hash wars” it engaged in as part of the Bitcoin ABC camp against the Bitcoin Cash Satoshi Vision (SV) Camp led by Craig Wright and Calvin Ayre.
Featured Image from Shutterstock
Get Exclusive Crypto Analysis by Professional Traders and Investors on Hacked.com. Sign up now and get the first month for free. Click here.