US bitcoin miners remain silent in the face of Kerrisdale’s ‘snake oil’ claims.

Investment firm Kerrisdale Capital is launching a “war on Bitcoin miners,” calling it an “industry of snake oil salesmen.” In response, the mining companies mostly refused to comment.

Kerrisdale's thesis coincides with a recent investment report that Riot Platforms is “heading for a mining collapse.”

To better understand Kerisdale's claims, Cointelegraph spoke to Sahm Adrangi, Chief Investment Officer of Kerisdale Capital.

“If you don't have a viable business model — and we see this all the time in the public markets — if you have a business that you know is structurally unviable, these companies will dissolve,” Adrangi said. “They prepare shares, invest those shares into the business. But there are no returns.

Kerisdale reported that Riot issued $41 million in shares in the first four months of 2024, representing an 18% share dilution.

“These are not viable business models. of [United States mining] Businesses are structurally broken – the industry is one of the worst I've ever seen,” Adrangi said.

Kerrisdale is shorting Riot.

Riot denies claims, industry complaints

A Riot spokesperson issued a statement to Cointelegraph following Kerisdale's report. The company strongly denies Kerrisdale's claims:

“We disagree with the inaccurate conclusions reached in the Bitcoin mining industry and Riot's behavior and Kerrisdale Capital's report,” a Riot spokesperson said. “We believe these errors will be reflected in the execution of our 2024 growth plans and the resulting financial performance.”

Cointelegraph contacted several US Bitcoin (BTC) mining companies regarding the report. Although we invited the industry to defend it, not all were available or declined to comment.

To get an alternative perspective to Adrangi, Cointelegraph spoke with William Foxley of The Mining Pod, which bills itself as the #1 podcast on Bitcoin mining.

“Bitcoin mining in the United States is booming, especially with another Trump presidency. According to Foxley, not only are the political winds shifting in favor of energy production, but bitcoin miners could face special protections if they continue to work with the Trump administration.

Foxley, an industry veteran who has worked for the past four years, including at Bitcoin Mining Compass, said the industry's future success is not tied to former President Donald Trump's electoral fortunes.

“Even if Trump loses, Bitcoin miners will be protected in states like Texas and Tennessee that prosecute Bitcoin miners.”

Foxley went on to say, “Bitcoin mining can be a very bad time,” concluding, “Bitcoin miners are often used.” [share issuance] There is a good case for using such a method based on the organization's performance to support development.

The reaction to US Bitcoin mining

According to Kerrisdale, US bitcoin miners were initially drawn to Texas because of the “cheap labor and lax regulatory environment,” but now say the “honeymoon is over.”

“The Texas energy policy makes no sense when it comes to Bitcoin mining,” Adrangi told Cointelegraph. “This whole idea that Bitcoin miners are good for the grid. It's such a torture process, and I don't think people really buy into it. Bitcoin miners are using a lot of energy.[..] It's what hurts the system.”

Kerisdale's report points to a recent decision in Navarro County as evidence that the tide is turning on miners.

On March 11, commissioners voted against a tax abatement for Riot's key development project in Corsicana. Riot says the expansion will bring in millions of dollars in investment and create hundreds of jobs.

However, lawmakers are pushing to approve such preferential tax conditions for the industry.

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Texas is braced for another summer of high energy prices as temperatures rise and air conditioning units kick in. In April, the Dallas Morning News reported that Power was selling at an 82 percent premium in 2023.

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

Pressure groups like the Texas Coalition Against Creemining say U.S. mining companies, including Riot, “waste insane amounts of energy and pay every Texan's electric bill.”

However, the issue is far from a closed book, and Riot is expected to request further updates.

Kerrisdale contacted officials.

Kerrisdale Capital's report into the US bitcoin mining industry isn't the only move the firm has made.

Kerrisdale has contacted state legislators to advise against allowing any future abatement requests from Riot.

Cointelegraph asked Adrangi why this was necessary, and he told us the reason was that “the industry needs to be kicked out of the US just like it was kicked out of China.”

In a letter to a Navarro County judge and commissioners, Kerisdale said the Riot Rockdale facility, a former employee, was unsafe for employees.

“There was dielectric fluid all over the place, on the floor… I mean, this stuff is flammable, it's not a good thing to breathe,” the worker told Kerrisdale.

“You know you're slippery and slippery [sic] Between the electric bomb around the dielectric liquid. That was actually the job and there weren't a lot of safety protocols,” the employee said.

Kerrisdale Riot alleges that it used ExxonMobile's Spectrasyn 2C product to cool its dip miners.

Kerrisdale said: “We believe Riot used Spectrasyn 2C at Rockdale because as a first mover in large-scale immersion frozen Bitcoin mining, there were not many safe, non-toxic and cost-effective immersion fluids available. Market Now”

Kerisdale hopes these points will give lawmakers pause in the face of further cuts.

Kerrisdale's influence is unclear

The Kerisdale report led to a sharp drop in Riot's stock on June 5. Shares fell 8.9 percent to $9.65 on Wednesday.

Since then, however, the stock has increased once. Riot stock ranged from a low of $9.50 to a high of $10.96 over the past month.

At the time of writing, Riot's stock was around $10, suggesting that the company may have weathered the worst of the impact, at least in the short term.

Riot's trump card?

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

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Following a meeting with Riot CEO Jason Les and Riot's head of public policy, Brian Morgenstern, Trump issued a statement in support of the industry, raising the specter of the U.S. central bank's digital currency (CBDC).

In a June 12 post for TruthSocial, Trump said, “Bitcoin mining may be our last line of defense against the CBCC. Biden's hatred of Bitcoin will only help China, Russia and the radical communist left. WE WANT THE REST OF BITCOIN TO WORK IN THE USA!!! It helps us become energy dominant!!!”

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

“Well, you know, Trump talks a lot,” Adrangi said.