Japanese ASIC Producer and Miner GMO Up For the Year, Down $8.7m Since Q1: Earnings Report

Colin Muller

GMO, a Japanese internet services company which produces in-house application-specific integrated circuit (ASIC) cryptocurrency miners and conducts its own Bitcoin and Bitcoin Cash mining operations, has seen its mining profitability fall during Q3, according to its quarterly earnings report.

In a common narrative in the cryptoasset industry, however, overall gains are still slightly up year-on-year despite the dramatic losses in valuation incurred during 2018, by 0.33 billion Japanese Yen (JPY) or roughly $2.9 million.

GMO produces and sells the B2 and B3 sha256 bitcoin miners, and operates a cloud mining service. The company’s crypto concern made losses in both Q2 and Q3, of 0.36 and 0.64 billion JPY respectively, approximately $3.1 and $5.6 million. The report cited a“worsening external environment” and “increasing depreciation cost” to explain the losses.

‘Worsening External Environment’

There are several indications that the bitcoin mining environment is becoming all-around more competitive and less profitable, and this is most likely alluded to in GMO’s statement.

As CryptoGlobe recently reported, the difficulty rate for bitcoin mining has fallen as of late, which is historically quite uncommon, and bucks the trend of almost constant difficulty rises on the network: only about 13% of bitcoin’s difficulty periods, dished-out in two-week units, have been negative according to analysts at Element Group.

hashDiffBtc14_11.png(from bitinfocharts.com)

Falling difficulty can necessarily only be the result of falling hashing power, which likely indicates distressed miners halting their operations as they become unprofitable.

All of the above analysis is consonant with GMO’s report. The depressed price of bitcoin is refusing to budge even as the network’s hashing power has generally continued to climb throughout 2018. Such a combination of trends cannot last indefinitely - a situation of negative profits is inevitable, either from unprofitable mining, or from the sunk cost of deactivated ASIC miners.

GMO is seeming to indicate its willingness to incur heavy losses, as its Q3 hashrate has risen from 400 to 674 petahash/second (PH/s) while losing millions of dollars in the process. The company also indicates its target of deploying 800 PH/s by the end of 2018.

Screenshot from 2018-11-14 11:39:04.png

Given that ASIC production and mining constitutes only 4.2% of GMO’s business concerns, the company seems able to absorb the losses and intent on surviving the (hopefully) temporary depression in cryptoasset prices, to continue for the long haul.