GMO Group loses JPY1.3B in cryptocurrency mining business
The Japanese GMO Group lost a considerable 1.3 billion yen in cryptocurrency business in 2018, particularly in the mining sector which saw a huge hit over the past few months.
The losses were attributed principally to two factors which were the decline in the Bitcoin Core (BTC) price as well as the depreciation cost of mining machines. So huge was the loss that GMO are now going for a policy change in this area.
According to the report, GMO’s mining share did not increase as expected due to the rise of the global hash rate, “which went beyond our initial assumption”. As already indicated, the decline in the BTC price was a major factor in this collapse. GMO also said that they bought expensive mining machines from other manufacturers, which led to decreased profitability.
The report goes on to say that the environment is increasingly competitive because of the decreased demand mainly due to the decline in the cryptocurrency price, which in turn leads to the decline in the sales price of mining machines from other manufacturers. Additionally, there was a delay in procurement of part of the electronic components, which led to the postponement of development and manufacture of mining machines.
The impairment loss of mining machines was costed at JPY 11.6B. A decision has been made to relocate the mining center to a region that will allow GMO to secure a cleaner and less expensive power supply.
GMO further stated that it would be difficult to recover the carrying amounts of the business assets, so it has been decided to record a loss of JPY 23.6B on the whole mining operation. The cryptocurrency exchange business also took a hit, but it was not so pronounced, although the slump in prices obviously had some effect.
Additionally, the GMO financial report also clarified that its mining output didn’t include extraordinary losses of circa $319.2 million. In December 2018, the firm announced that it would be closing down its mining operations. At that time, the decision would incur a ¥35.5 billion worth of extraordinary losses as GMO would quit the development, manufacture, and sales of mining equipment. It remains to be seen whether this loss will have an effect on GMO’s operations in the cryptocurrency space in the short to medium term.
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