Bitcoin mining service CEX.io has announced it will suspend its cloud mining activities.
The company stated in a 12th January blog post that it is no longer profitable, blaming declining revenues amid a dropping bitcoin price. CEX chief information officer Jeffrey Smith told CoinDesk that operations would resume if the price of bitcoin climbs above $320, calling the move “temporary”.
The suspension comes after CEX customers experienced disruptions to their cloud mining service, which the company at the time attributed to third-party complications. Smith said that the two issues are unrelated; that the economic impact of a drop in bitcoin prices cut into its ability to offer its clients profitable mining services.
Indications from CEX’s forums suggest that customers were informed over the weekend about both the risk of unprofitability as well as stipulations in the customer terms of service related to potential stoppages. On Friday, a CEX spokesperson cited the former when asked about reported customer compensation issues.
Smith told CoinDesk:
“Our decision is based on the fact that we pay for maintenance in [US dollars], and mine bitcoins, and if you do the math – you will see that with the next mining difficulty rise – maintenance costs will be greater than the profit from mining.”
No broader company impact
According to CEX, the company will continue to honor customer balances for cloud hashing power and previous discussions to secure cheaper resources will continue. Smith added that clients will also have the option to turn on their cloud mining capacity should they choose.
Smith acknowledged that CEX had foreseen the risk of unprofitable mining, and said that the company is actively seeking solutions to both address the problems related to its cloud mining unit, as well as continue to push development of both its cryptocurrency exchange and mining pool, GHash.io.
“Now we are going to concentrate all our resources on building out the best crypto exchange and on the search of hardware providers and cheap electricity,” he said.
He added that CEX has no plans to significantly adjust its operational strategy in the wake of the cloud mining suspension, though he noted that the company could be impacted in the long term as it moves to diversify its services.
Smith’s announcement on Twitter elicited a response from observers and customers, prompting some to speculate about CEX’s future and what led to the cloud mining stoppage.
Signs from the CEX marketplace for hashing power suggest that some customers may be selling their holdings in the wake of the suspension. Questions have also been raised about whether or not other companies that offer cloud mining services have been impacted by the recent drop in the price of bitcoin.
News of the suspension among the wider community has been met by a mixture of dismay and frustration. On the company’s official forum, one customer said that the suspension should have been put in place before the problems worsened, writing:
“Maintenance costs are just too high. No profit can be made. Heck, I was losing money by owning GHs from CEX. Even worse, I sold all of my GHs and, because I had additional hashing power from referrals, I was still losing money.”
“I have faith that CEX will rebound from this,” the user added. “But, these exorbitant fees have got to change otherwise it’ll be the end of CEX.”
Images via CEX.io, Shutterstock