US Bitcoin Miners Stay Silent Over Kerrisdale’s “Snake Oil” Claims – Crypto News BTC

Investment firm Kerrisdale Capital is launching “a war on Bitcoin miners,” calling them a “snake oil business.” In response, mining companies have largely refused to comment.

Kerrisdale’s thesis coincides with his latest funding report, which claims Riot Platforms is “heading toward a mine collapse.”

Cointelegraph spoke with Sahm Adrangi, CEO of Kerrisdale Capital, to better understand Kerrisdale’s claims.

“When you don’t have a viable business model — and we see this regularly in the public markets — if you’ve acquired a structurally unprofitable company, those companies become diluted,” Adrangi said. “They submit shares, they take those shares to invest money in the company. However, there is no return.

Kerrisdale reports that Riot has issued $41 million in stock in the first four months of 2024, representing an 18% stock dilution.

“These are not viable business models. (US mining) companies are structurally screwed – the sector is without a doubt one of the worst I’ve ever seen,” Adrangi said.

Kerrisdale bypasses Riot.

Riot denies claims, companies object

A Riot spokesperson made an announcement to Cointelegraph following Kerrisdale’s report. The company strongly refutes Kerrisdale’s claims:

“We do not agree with the characterization of Bitcoin mining activity and Riot, nor with the equally erroneous conclusions drawn in Kerrisdale Capital’s report,” a Riot spokesperson said. “We believe that these errors will be demonstrated by the execution of our ambitious development plans for 2024 and the resulting financial efficiency.”

Cointelegraph has contacted numerous US Bitcoin (BTC) mining companies regarding the report. Despite our invitation to defend the company, all were unavailable or simply refused to comment.

To offer another perspective on Adrangi, Cointelegraph spoke with William Foxley of The mining modulewhich considers itself the #1 Bitcoin mining podcast.

“Bitcoin mining in the United States is extremely bullish, especially with another Trump presidency. Not only are the political winds shifting in favor of energy production, but Bitcoin miners could benefit from specific protections if they continue working with the Trump administration,” Foxley said.

Foxley, an industry insider who has worked in Bitcoin mining for the past four years, including at mining company Bitcoin Compass, says the company’s future success simply isn’t about fortune election of former President Donald Trump.

“Even when Trump loses, Bitcoin miners are protected by states like Texas and Tennessee that are chasing Bitcoin miners.”

Foxley went on to say, “This is probably a bad time to report on Bitcoin mining,” concluding that “While Bitcoin miners typically use a lot (issuing shares) to fund development, it There is good precedent for using such an agency-based approach.”

The backlash against US Bitcoin mining

According to Kerrisdale, American Bitcoin miners were initially interested in Texas because of “low-cost electricity and a lax regulatory environment,” but now say “the honeymoon is over.”

“Texas’ energy policy regarding Bitcoin mining is not practical,” Adrangi told Cointelegraph. “This whole idea that these Bitcoin miners are good for the network. It’s such a tortured mental process, and I can’t imagine people really buy into it. Bitcoin miners use a lot of energy. Their use (..) is what puts a strain on the system.”

The Kerrisdale report points to a current ruling in Navarro County as evidence that the tide is rising against miners.

On March 11, commissioners voted against a tax cut for Riot’s key development project in Corsica. Riot says the development would result in millions of dollars of investment and create hundreds of jobs.

Nevertheless, lawmakers are increasingly cautious when approving such preferential tax circumstances for businesses.

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Texans are bracing for another summer of high electricity prices as temperatures soar and air conditioners kick in. In April, the Dallas Morning News reported that electricity was selling at a rate higher than 82% compared to 2023.

In this context, the energy and water consumption of Bitcoin miners arouses the anger of some residents of Texas.

Advocacy groups such as the Texas Coalition Towards Cryptomining claim that US mining companies, including Riot, are “wasting insane amounts of energy and driving up the electricity bills of every Texan.”

However, the issue is far from a closed book and Riot should seek additional cuts.

Kerrisdale contacts agents

Kerrisdale Capital’s report on US Bitcoin mining activity is simply not the only action the agency is taking.

Kerrisdale also contacted state lawmakers to object to approving any future cut requests from Riot.

Cointelegraph asked Adrangi why this was mandatory, who told us it was because “the entire company should be kicked out of the United States, just like it was kicked out of China.”

In a letter to a judge and Navarro County commissioners, Kerrisdale cites the case of a former employee who said Riot’s Rockdale facility was unsafe for staff.

“There was dielectric fluid everywhere, all around the surface…I mean, these things are flammable, it’s not a good thing to breathe in,” the employee told Kerrisdale.

“You realize you are slipping and sliding (sic) on dielectric fluid in the middle of an {electric} bomb. It was actually the job to be done and there weren’t a lot of safety protocols,” the worker mentioned.

Kerrisdale also accuses Riot of using an ExxonMobile product, Spectrasyn 2C, to cool its miners by immersion – a product not specifically authorized by ExxonMobile for such use.

Kerrisdale says: “We imagine Riot used Spectrasyn 2C at Rockdale because, as the main engine for large-scale immersion-cooled Bitcoin mining, it didn’t have as many safe immersion fluids, no toxic and profitable as there are on the market now.

Kerrisdale hopes these factors will give lawmakers pause in the face of further demands for reductions.

Kerrisdale’s impression is unclear

Kerrisdale’s report caused Riot’s stock to drop sharply on June 5. Its stock price fell 8.9% on Wednesday to $9.65.

Since then, however, the stock has risen again. For the past month, Riot stock has ranged from a low of $9.50 to a high of $10.96.

At the time of writing, Riot’s stock was hovering around the $10 mark, suggesting the company might have gotten over the worst of it, at least in the short term.

Riot’s advantage?

Kerrisdale has made her case to the market and Texas lawmakers, but Riot is making its own case to Trump.

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Following a meeting with Riot CEO Jason Les and Riot Head of Public Policy Brian Morgenstern, Trump released an announcement strongly supportive of the industry while raising the possibility of a digital currency of the American central bank (CBDC).

In a June 12 article on TruthSocial, Trump said: “Bitcoin mining could also be our last line of protection against a CBDC. Biden’s hatred of Bitcoin only helps China, Russia and the radical communist left. We would like all remaining Bitcoins to be MADE IN THE USA!!! This will help us to be ENERGY DOMINANT!!!

Cointelegraph asked Adrangi if Trump’s support might change his assessment of Bitcoin mining, but Adrangi was less than impressed by the former president’s intervention.

“Well, Trump says a lot of things,” Adrangi said.