Kerrisdale Capital, an American investment firm, unleashed a firestorm of reaction on Wednesday with a series of public communications aggressively targeting Bitcoin mining companies. In several parts thread At
“Today, we launch a war against Bitcoin miners, an industry of snake oil salesmen who are incinerating both investors' capital and the environment and who should be banished from the United States, just like the Chinese RTO frauds that we helped expel a decade ago,” the firm said. declared.
Kerrisdale also revealed that she had begun sending letters to Texas officials, including the Navarro City Commission and state senators, laying out her complaints and calling for regulatory action. Furthermore, the company revealed its financial situation and stated: “We are short RIOT (and long Bitcoin as a hedge).”
Kerrisdale's criticism focuses on the business model of RIOT blockchain, which, he argues, is inherently flawed: “Like other US publicly traded miners, RIOT's business model is a dysfunctional cash-burning hamster wheel, which is why it plunders the retail shareholders with the continued issuance of ATMs to finance operations.” They noted that despite BTC's high market prices, RIOT's post-halving operations have not been profitable.
Additional financial analysis from Kerrisdale highlighted that RIOT has issued $2.3 billion in shares since 2020, leading to a six-fold increase in shares outstanding to fund $1.6 billion in cash burn. According to Kerrisdale, this has not been matched by an increase in Bitcoin production per share or BTC holdings per share, leading them to conclude that the only benefit to shareholders would come from rising Bitcoin prices, a strategy that they considered insufficient for the investment.
On the environmental front, Kerrisdale criticized Bitcoin mining for its energy-intensive use and reliance on incentives that may not align with broader environmental goals. “RIOT's economics would be even worse without generous network incentives and tax credits,” the company argued, noting that those benefits are being questioned by regulators and may not persist.
Bitcoin mining industry and experts respond
The industry response was swift, with several prominent figures defending the sector and attacking Kerrisdale's motives and understanding of the space. Daniel Batten, founder of CH4 Capital and a member of the advisory board of mining giant Bitcoin Marathon, suggested that Kerrisdale should focus more on improving investor profitability rather than attacking industry practices.
Respectfully, perhaps we should redistribute some of that enthusiasm (and focus) on increasing investor returns? pic.twitter.com/2HR3hVFztw
—Daniel Batten (@DSBatten) June 6, 2024
Upstream Data's Adam O defended the environmental impact of Bitcoin mining, indicating, “Good luck vilifying what makes all stakeholders better, reduces waste, and reduces methane emissions. “The dumbest mission of the decade.” Steven Lubka, head of private clients and family offices at Swan Bitcoin, criticized Kerrisdale's strategy and pointed out the failure. Short MicroStrategy (MSTR) Position which they entered two months ago, as well as the decrease in their assets under management as a sign of deeper problems within the company itself.
“Let's take a look at these absolute losers clamoring for the government to bail out their MSTR short via FUD mining. (…) Now let's look at their AUM. 318 million dollars this quarter, let's see where they were a few years ago? 1.3 billion dollars. That's a big drop in your total AUM/invested amount. In conclusion, they are trying to save their fund because they know that MSTR is about to make money by appealing to the government.”
The debate also extended to Environmental merits of Bitcoin mining.. Simon Dixon, an angel investor, presented facts debunking the myth that Bitcoin mining is predominantly harmful to the environment. He highlighted Bitcoin mining's role in mitigating methane emissions and its synergies with renewable energy sources such as solar and wind, as well as the ability to help balance the grid.
Dig deeper pic.twitter.com/JQmdIw7SkD
—Simon Dixon (@SimonDixonTwitt) June 5, 2024
Mark Harvey, a Bitcoin educator, just stated: “You will get a higher return on investment and more friends simply by buying and holding Bitcoin.”
At the time of publication, BTC was trading at $70,820.
Featured image created with DALL·E, chart from TradingView.com
Leave feedback about this