Japanese IT Giant GMO Lost $12 Million in the Crypto Sector Last Year

GMO Internet, a Japanese IT giant that has ventured into the cryptocurrency sector through a mining operation and a cryptocurrency exchange, has recently reported an operating loss of 1.36 billion yen (about $11.75 million) in its cryptocurrency business last year.

According to the firm’s financial results for the fiscal year 2018, it made $74.51 million in net sales last year through its crypto segment. Its cryptocurrency exchange reportedly managed to make nearly $7 million in profit, while its mining venture lost roughly $18.3 million.

Per the results, the fourth quarter of last year saw the largest loss. According to CryptoCompare data, during Q4 of 2018 the prices of most cryptocurrencies hit their low in this bear market, with bitcoin hitting a $3,200 low in December.

As CoinDesk pointed out, GMO noted the loss didn’t include an “extraordinary loss” of $319 million in its cryptocurrency mining business, which it forecasted in December over the impairment losses from transfers of receivables, coming from it stopping producing and selling cryptocurrency miners.

As covered, the company left the bitcoin mining hardware sector after enduring significant losses. Given its results, the IT giant is changing its crypto mining business’ policy. It’s now set to relocate to a new mining center, as an increasing bitcoin hashrate stopped it from increasing its share in the market.

As covered, the flagship cryptocurrency’s hashrate hit a three-month high last month, as miners kept showing renewed confidence. This, according to data from Blockchain.com.

Bitcoin's hashrate evolution over time

The company also pointed out that it purchased “expensive mining machines from other manufacturers,” which saw its profitability decrease. To counter the trend, it’s looking to move to an unnamed location this year, where it’ll pay less for energy.

The electricity cost in the new location, which is confidential, is less than half of that in Northern Europe, which is 7-8 cents per kWh including running costs. We believe the relocation will impact our earnings this summer.

It revealed it’s still planning to launch its Japanese Yen-backed stablecoin GYEN, and noted it’s looking to launch it this year in overseas market.

Chinese Yuan 'Inversely Correlated' with Bitcoin, Amidst US-China Trade Wars

Since January 2018, China and the US have been involved in an intense trade war in which both countries have significantly increased tariffs on imported goods and services.

Due partly to the rising tension between the two countries, the Chinese yuan (CNY) has been losing value against the USD. During the same time period, the price of bitcoin (BTC) and other major cryptoassets has been surging.

As noted by the South China Morning Post (SCMP), the value of BTC, the world’s most dominant cryptocurrency, increased by 26.5% to $7,878 during the time period from May 5 to May 17. Notably, US President Donald Trump had announced on May 5 that he would further increase tariffs on goods imported from mainland China.

Chinese Yuan Weakens as Nation’s Government Responds to Increased Tariffs

The SCMP pointed out that the yuan dropped to its lowest level since the past six months after the Chinese government responded to Trump administration’s decision to impose higher tariffs on China.

Commenting on the price fluctuations of both the yuan and bitcoin, Garrick Hileman, a Macroeconomics Researcher at London School of Economics (LSE) and Head of Research at Blockchain.com, remarked:

We are observing a strong inverse correlation between the [Renminbi] RMB’s value and bitcoin, meaning that recent RMB declines over trade tensions have been closely matched by increases in the value of bitcoin.

“Correlation Does Not Necessarily Equal Causation”

Hileman also mentioned that we “cannot be 100% certain” that the bitcoin price has been increasing due to heightened concerns regarding trade tensions and the corresponding decline in the value of the yuan. The blockchain researcher stated:

Trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation.

Hileman, who earned his Phd from LSE, revealed:

This is not the first time we’ve seen significant increases in the value of bitcoin taking place alongside yuan concerns.

He added that there’s “growing recognition of bitcoin as ‘digital gold’ and it being used as a hedge against various macroeconomic risks.”

“This Year, the Narrative Is Bitcoin, Bitcoin, Bitcoin”

According to the SCMP, bitcoin’s price may have surged recently due to the generally positive remarks made about it at the Consensus 2019 conference.

Meltem Demirors, the Chief Strategy Officer at CoinShares, a crypto treasury management firm, has also confirmed recently that the narrative this year has been mostly about Bitcoin. Demirors revealed that both institutions and retail investors are “feeling good” and are “more confident” about the long-term potential of Bitcoin and the evolving ecosystem that supports it.