According to Bloomberg, Kerrisdale Capital Management LLC has suggested that cryptocurrency enthusiasts should consider buying tokens instead of miner stocks due to the challenging nature of Bitcoin mining. The firm has been making bets across the industry, with its latest short position targeting shares of a Castle Rock, Colorado-based company. The company's shares fell by up to 8.9% on Wednesday following this move. A representative from the company did not immediately respond to a request for comment.
Kerrisdale's founder, Adrangi, expressed his views on Bitcoin mining, stating that all Bitcoin miners are shorts and the current business model, especially with current valuations, does not make sense. He further explained that crypto-mining is a commodity business with almost zero barriers to entry for those with access to a computer and energy. He also highlighted that US miners face global competition as new mining projects emerge worldwide, a trend he expects to intensify.
This is not the first time Kerrisdale has targeted a cryptocurrency-exposed company. In March, the firm criticized MicroStrategy's relative attractiveness, stating that none of the reasons provided justified paying well over double for the same coin. This stance has proven profitable for Kerrisdale, even before accounting for any costs to take the position, as MicroStrategy shares have seen a decline.
However, there are risks associated with this approach. Bitcoin miners could potentially pivot their business models, attracting investors and strategic buyers in the process.