Kerrisdale Capital, an investment management firm, has launched a severe critique of the Bitcoin mining industry in the United States, denouncing it as a breeding ground for deceptive practices that drain investor funds and harm the environment.

In a publication on X, the firm announced its campaign against the growing industry by sending two letters to Texas authorities. One letter was directed to the Navarro City Commission, where Riot Blockchain is based, while the other was addressed to Texas state senators.

The firm is urging authorities to clamp down on Bitcoin mining in the state, likening it to fraudulent schemes uncovered in China a decade ago. Their focus will be on Bitcoin mining operations in Texas, a significant hub for such activities due to its low energy costs.

Their opposition to Bitcoin mining has led Kerrisdale Capital to disclose that they are actively shorting Riot Blockchain’s stock. They view the mining farm as a prime example of a dysfunctional Bitcoin mining business model trapped in a cycle of cash burn.

According to Kerrisdale Capital's assessment, these public mining firms often rely on continually issuing new shares to fund operations, even during times when Bitcoin prices are at or near all-time highs, indicating a flawed business model. They also highlight profitability issues for these operations, even when prices are at record levels, citing environmental concerns and increasing regulatory scrutiny surrounding mining.

Furthermore, they argue that with the availability of spot Bitcoin exchange-traded funds (ETFs), owning shares of mining farms poses an unnecessary risk. Over the last six months, spot ETF issuers in the United States have purchased billions worth of BTC on behalf of their clients.

In response, Bob Burnett, the founder of Barefoot Mining, has vehemently rejected the "snake oil salesman" label, emphasizing the dedication and hard work of securing the network. Despite criticism, data from Mempool.Space shows that the total hash rate remains high and steady at over 500 EH/s, with Foundry USA remaining the largest mining farm in the world by hash rate even after the halving.

Key Points

Kerrisdale Capital’s Critique:
- Environmental and Economic Concerns: Kerrisdale Capital criticizes Bitcoin mining for draining investor funds and causing environmental harm.
- Regulatory Pressure: Urges Texas authorities to crack down on Bitcoin mining, likening it to fraudulent schemes seen in China.
Targeting Riot Blockchain:
- Active Shorting: Kerrisdale Capital is actively shorting Riot Blockchain’s stock, viewing it as an example of a dysfunctional business model.
- Continuous Funding Issues: Highlights that public mining firms often issue new shares to fund operations, indicating a flawed business model.
Alternative Investments:
- Spot Bitcoin ETFs: Suggests that owning shares of mining farms poses unnecessary risk given the availability of spot Bitcoin ETFs.
Response from the Mining Community:
- Defense by Bob Burnett: The founder of Barefoot Mining rejects Kerrisdale’s claims, emphasizing the integrity and effort in securing the Bitcoin network.
- Steady Hash Rate: Despite criticisms, the total hash rate remains high and steady, demonstrating the resilience and continued activity within the network.

Conclusion

Kerrisdale Capital’s campaign against Bitcoin mining, particularly targeting Texas and Riot Blockchain, underscores the ongoing debates about the environmental and economic impacts of cryptocurrency mining. While Kerrisdale emphasizes the risks and issues within the industry, the mining community continues to defend its practices and maintain high operational standards. The steady hash rate and strong network activity suggest that Bitcoin mining remains robust despite increasing scrutiny and regulatory pressures.