As a researcher with a background in finance and environmental sustainability, I find Kerrisdale Capital’s criticism of the Bitcoin mining industry thought-provoking. The investment firm’s concerns about the financial sustainability of some mining operations and their environmental impact are valid and should not be dismissed outright.
As an analyst at Kerrisdale Capital, I’d like to express our perspective on the Bitcoin mining industry in the US. We’ve taken a critical stance towards this sector, labeling it as a breeding ground for “snake oil salesmen” who voraciously consume investor funds and inflict significant environmental damage.
Investment Firm Attacks Bitcoin, Claims Mining Model Flawed
In a recent post on X, the management firm declared its intent to challenge the expanding industry by penning two missives to the Texas regulatory bodies.
One is addressed to the Navarro City Commission, where Riot Blockchain has set up its base. Another letter was sent to the Texas state senators.
The investment firm strongly recommends that authorities take action against Bitcoin mining in the state, drawing a parallel between it and the deceitful Bitcoin operations uncovered in China a decade ago.
The significant aspect of this conflict lies in Bitcoin mining being a key focus, given Texas’s appeal as a prime location in the US due to its affordable energy costs.
If their opposition to Bitcoin mining is not misleading, Kerrisdale Capital has revealed that they are selling Riot Blockchain’s stock short. The financial firm believes the mining operation represents a problematic Bitcoin mining business structure, stuck in a cycle of heavy spending.
According to the investment firm’s perspective, these publicly traded mining companies predominantly finance their operations by consistently offering new shares for sale, even when Bitcoin reaches its peak prices. This reliance on issuing new shares, as argued by the firm, is indicative of a potentially problematic business model.
As a crypto investor, I’ve taken note of Kerrisdale Capital’s observation that some Bitcoin mining operations remain profitable even during price peaks. However, they have highlighted challenges for Riot Blockchain in achieving profitability during these cycles. Additionally, they raise concerns about environmental issues and growing regulatory scrutiny surrounding mining as factors that may impact the industry moving forward.
Moreover, some believe that investing in Bitcoin exchange-traded funds (ETFs) eliminates the need to directly own mining farm shares due to the large amounts of Bitcoin these ETFs have acquired over the past six months in the US.
Miner Fights Back, Network Strong
Just as anticipated, the assault has incited strong reactions. Bob Burnett, the mastermind behind Barefoot Mining, strongly disputes being branded a “snake oil salesman.” Instead, he highlights his unwavering commitment and tireless efforts in building the network.
Noteworthy, the founder highlights the ability of mining companies to persevere through tough economic situations and their contribution to upholding the overall health of the industry.
Despite facing criticisms, the data from Mempool.Space indicates a consistent and robust total hash rate of over 500 exahashes per second (EH/s) during writing periods. Simultaneously, following the Halving event, Foundry USA continues to lead as the largest mining operation globally in terms of hash power.
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2024-06-06 23:11