Argo Mining Discontinues Consumer Facing Service

Several months ago, I posted about how I was experimenting with several mining-as-a-service companies. On February 19th, one of the miners sent an email to their customers saying they were discontinuing the service and would be cancelling the mining rigs as of March 1st. In their words:

As a company, we want to offer Argo miners packages they can rely on, packages that we are proud of and packages that we would purchase ourselves. Unfortunately, this is not the case for your package.

The main reason they are doing this is to avoid short-term financial stress, but it is also a long-term strategic decision. Bitcoin mining is going through a brutal year, and even though the idea is sound, the timing is not good for a consumer facing mining operation. Instead, direct mining will prove to be the more profitable method of building out their business.

Additionally, Argo Mining will be beautifully positioned to sell consumer mining services to users the next time a bull rush happens. They’ve learned from their mistakes and have the client list, but just need the money and interest to appear.

Leaving Customers in the Dark

The company has been comically opaque about this decision. If one were to check their website, you would see that the service was “SOLD OUT” rather than no longer being offered. Additionally, their Twitter feed and website offer no information regarding the strategic shift.

This looks like a way bigger financial issue than the company is currently letting on, as it is almost a complete shift in their strategy. Although they have only recently IPO’ed, having a heavy cash burn may have affected the financial health of the company more than was initially expected.

An Aggressive Shift

It may be considered normal to “pivot” in Silicon Valley, but to make such a huge strategic change as a public company is notable, to say the least. The actual packages have been unprofitable for customers since the beginning. Having experimented with the Zcash and Horizen packages, it was clear that the cost of mining was overrunning the actual cryptocurrency being mined.

In the short-term, it wasn’t logical to continue using the services of Argo, but in anticipation of a crypto recovery, it would make sense to continue accumulating mining rigs. Argo had a limited offering, and it is very difficult to find convenient ways to get into mining without being technologically sophisticated or requiring a large investment.

Thinking on a Longer Horizon

The crypto winter may end up being good for the overall health of the industry, but it is definitely making it difficult for retail investors to find an edge in the market.

An investment in Argo could prove to be prudent in the future, but in the short-term, the restructuring will come with a high degree of volatility in the stock. As the update they published says:

“The restructuring measures and strategy refocus are expected to reduce the overall cash burn and deliver EBITDA (earnings before interest, taxes, depreciation, and amortization) break-even in the second half of 2019.”

It is clear they are a volatile stock right now, which should be expected of any blockchain-adjacent company. These cost-cutting measures will hopefully be enough to position Argo in a place where they can have a profitable 2019, and once the initial adjustment occurs, investors should be able to do well on the flip.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.