Kerrisdale Capital's Bold Stance

Kerrisdale Capital, a US investment firm, started a storm of reactions with public communications aggressively targeting Bitcoin mining companies.

In a multi-part thread on X, Kerrisdale announced its campaign against what it describes as snake oil salesmen in the BTC mining industry, accusing them of being both a financial sinkhole and an environmental hazard.

"Today, we launch a war against Bitcoin miners, an industry of snake oil salesmen that are incinerating both investor capital and the environment and should be banished from America much like the Chinese RTO frauds that we helped kick out a decade ago," the firm declared.

Letters to Officials

Kerrisdale also revealed it had begun by sending letters to Texas officials, including the Navarro City Commission and state senators, outlining their grievances and calling for regulatory action. Additionally, the firm disclosed its financial position, stating, "We're short RIOT (and long Bitcoin as a hedge)."

A Critique of RIOT Blockchain

Kerrisdale's critique centers on RIOT Blockchain's business model, which it argues is inherently flawed. They point out that despite BTC's high market prices, RIOT's post-halving operations have not been profitable.

"Like other US listed miners, RIOT's biz model is a dysfunctional hamster wheel of cash burn, which is why it loots retail shareholders with non-stop ATM issuance to fund operations."

Further financial analysis from Kerrisdale highlighted that RIOT has issued $2.3 billion in stock since 2020, which has led to a sixfold increase in shares outstanding to fund $1.6 billion in cash burn.

According to Kerrisdale, this has not corresponded with 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 they deemed insufficient for investment.

Environmental Concerns

On the environmental front, Kerrisdale criticized Bitcoin mining for its heavy energy use and reliance on incentives that may not align with broader ecological goals. "RIOT's economics would look even worse without generous grid incentives and tax credits," the firm argued, noting that regulators are questioning such benefits and might not persist.

Industry Response

The industry response was quick, with several prominent figures defending the sector and attacking Kerrisdale's motives and understanding of the space. Daniel Batten, founder of CH4 Capital and advisory board member at Bitcoin mining giant Marathon, suggested Kerrisdale should focus more on enhancing investor returns rather than attacking industry practices.

Adam O of Upstream Data defended Bitcoin mining's environmental impact, stating, **"Good luck vilifying that which improves all stakeholders, reduces waste, and reduces methane emissions. It's the dumbest mission of the decade."

** Steven Lubka, Head of Private Clients & Family Offices at Swan Bitcoin, criticized Kerrisdale's strategy and pointed to the failing MicroStrategy (MSTR) short position they entered two months ago and their declining assets under management as a sign of deeper issues within the firm itself.

Broader Debate

The debate also extended to the environmental merits of Bitcoin mining. For example, angel investor Simon Dixon said Bitcoin mining does not harm the environment. He said it has been proven that Bitcoin mining is crucial in mitigating methane emissions. Dixon also said it has synergies with renewable energy sources such as solar and wind and can help balance the grid.

Mark Harvey, a Bitcoin educator, said, "You will make a higher ROI + more friends by just buying and holding Bitcoin."