Bitcoin mining company Riot Platforms stated in its latest annual report that the ongoing chip shortage, growing computational power requirements, and the deepening climate-friendly agenda in the United States may have potential implications for its balance sheet.
In its annual 10-K filing submitted on February 23, Riot specifically highlighted over 13 key risks that could affect its future profitability in Bitcoin mining. One of these risks is the continued global chip crisis, as only a few manufacturers are capable of producing the “highly specialized” ASIC chips on which it relies.
Riot stated, “The ongoing global supply chain crisis coupled with increased demand for computer chips has resulted in a semiconductor shortage.” Until the chip shortage crisis is resolved, the company expects to continue paying “higher than usual” costs to acquire and install mining machines.
However, Riot pointed out that even if they obtain ASIC mining machines, they may still face “design flaws.” The company stated that in the past, they encountered complex software and firmware issues while attempting to adapt mining equipment for “immersive cooling” environments, and similar problems may arise in the future.
Other risks mentioned by Riot include the “increasingly fierce industry competition,” which means the company needs to continue increasing its computational power in line with the global hash rate to maintain its market share. At the same time, the company referred to Bitcoin facing “significant scalability barriers” that could hinder its acceptance as a widely-used payment method.
Riot stated, “Demand for Bitcoin may stagnate or decrease,” which could have a negative impact on the price of Bitcoin and weaken Riot’s balance sheet. Additionally, Riot warned that if the price of Bitcoin rises proportionally after the upcoming halving event scheduled for the first half of this year, the company’s mining revenue will decrease, potentially causing significant adverse effects on its operational performance and financial condition.
Riot also mentioned the increasing support for climate change agendas by the US and Texas governments, which could present challenges for the company. The company believes that if subjected to stricter regulations than its peers in other regions, Riot may lose its competitive advantage.
Riot stated:
The US Department of Energy’s statistical and analytical agency, the Energy Information Administration (EIA), announced at the end of January that it would investigate the electricity consumption of domestic cryptocurrency mining companies. However, this move was opposed by Riot and the Texas Blockchain Council (TBC), who filed a lawsuit. Recently, a temporary restraining order (TRO) was enforced by the court, prohibiting the EIA from requesting responses from cryptocurrency miners and sharing any data obtained from the investigation.
Related reports: “Cantor Fitzgerald Report: 11 Listed Mining Companies May Struggle to Profit from Mining after Bitcoin Halving” and “US Energy Information Administration to Investigate Cryptocurrency Mining Electricity Consumption, Citing Increased Bitcoin Prices Stimulating More Mining Activity.”
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