GMO Internet Leaves Bitcoin Mining Hardware Sector After Enduring Huge Loss

Japanese IT giant GMO Internet has recently revealed it is leaving the bitcoin mining hardware sector after it endured a huge loss this year, over the cryptocurrency ecosystem’s year-long bear market.

Through a regulatory filing, according to Finance Magnates, the IT giant revealed that as the price of cryptocurrencies drops, the profitability of its crypto mining chips drops as well. The filing reads:

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.

The company’s move comes little over a year after it decided to enter the sector, and a shortly after it revealed its 7nm bitcoin miner, which it claimed would be an influential machine in the industry over its high hashing power and low electricity consumption. A key reason behind its move, the report states, is declining user interest.

The ‘extraordinary loss’ it refers to is of 35.5 billion Japanese Yen (JPY), equivalent to about $318 million. These losses, it adds, will see GMO Internet no longer “develop, manufacture, and sell mining machines.” Despite the move, it’s still set to continue its in-house mining operation, although it’ll relocate it to a mining center where it’ll pay less for energy.

GMO’s mining business has seen it lose over $5.5 million in the third quarter of this year, and $3.5 million in the second quarter. As CryptoGlobe covered the ASIC producer is now down over $8.7 million since the first quarter of 2018.

The IT giant also has its own cryptocurrency exchange called GMO Coin, which as covered decided to only list BCH and not Bitcoin Cash Satoshi’s Vision (BSV). The company is set to launch its own yen-backed stablecoin next year, and launched its BTC mining operation in September of last year.

Notably this year’s bear market has seen various cryptocurrency miners shut down their operations, and as such it’s notable GMO is still running its machines. As covered, bitcoin’s hashrate plummeted as miners kept struggling to stay afloat. This, according to some, reduces the network’s security.

Neatly 70 Crypto-Focused Funds Closed This Year as Institutional Investors Tread Carefully

Data from the San Francisco-based Crypto Fund Research has shown that nearly 70 cryptocurrency-focused hedge funds have closed this year, while the number of new funds opening is nearly half of what it was in 2018.

The funds reportedly mostly catered to pensions, family offices, and wealthy individuals. Region-wise, data shows North America leads in the number of crypto fund closures with 28 shutting down this year. Europe followed it with 23 closures, and the Asia-Pacific region came in third with 14 closures.

Bloomberg reports that the volatile nature of cryptocurrency prices and regulatory uncertainty surrounding the nascent space have been keeping institutional investors at bay. Nic Carter, the co-founder of Boston-based crypto market tracker Coin Metrics, was quoted as saying the market is “definitely retail driven and will remain so for the foreseeable future.”

The news outlet noted, however, that a Fidelity survey has shown institutions’’ investments into cryptocurrencies are likely to increase over the next five years, and that the CEO of Galaxi Investments Mike Novogratz has said in a recent interview he believes the next wave of adoption will come from “the wealth advisers, maybe with endowments and small foundations participating.”

Spencer Bogart, general partner at San Francisco-based Blockchain Capital, pointed out it’s a matter of expectations, as while to some the levels of institutional adoption are “disappointing or underwhelming,” to him they are a “radical success.” He said:

To me, the fact that there is any institutional adoption for Bitcoin only 10 years into existence is a radical success and beyond what anyone could have imagined just 3 or 4 years ago.

Data from the Crypto Fund Research’s website shows there are currently a total of 804 cryptocurrency-focused funds, 355 of which are hedge funds, and of are venture capital funds. Most crypto funds – 403 – have less than $10 million worth of assets under management, while only 57 have over $100 million under management.

Featured image via Pixabay.