bash script use cut command at variable and store result at another variable

You can avoid the loop and cut etc by using:

awk -F ':' '{system("ping " $1);}' config.txt

However it would be better if you post a snippet of your config.txt

The awk solution is what I would use, but if you want to understand your problems with bash, here is a revised version of your script.

#!/bin/bash -vx

##config file with ip addresses like 10.10.10.1:80
file=config.txt

while read line ; do
  ##this line is not correct, should strip :port and store to ip var
  ip=$( echo "$line" |cut -d\: -f1 )
  ping $ip
done < ${file}

You could write your top line as

for line in $(cat $file) ; do ...

(but not recommended).

You needed command substitution $( ... ) to get the value assigned to $ip

reading lines from a file is usually considered more efficient with the while read line ... done < ${file} pattern.

I hope this helps.