Bitcoin mining company Riot Platforms stated in its latest annual report that the ongoing chip shortage, increasing computational power requirements, and deepening climate-friendly agenda in the United States may have potential impacts on its balance sheet.
Global chip shortage may affect mining business profitability
Riot emphasized over 13 key risks that could impact its future Bitcoin mining profitability in its annual 10-K filing submitted on February 23. One of them is the ongoing global chip crisis, as only a few manufacturers can produce the “highly specialized” ASIC chips it relies on.
Riot wrote, “The ongoing global supply chain crisis, coupled with the increasing demand for computer chips, has resulted in a shortage of semiconductors.” Until the chip shortage crisis is resolved, the company expects to continue paying “above normal” 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 issues in software and firmware when attempting to adapt mining equipment to “immersive cooling” environments, and they may encounter similar problems in the future.
Other risks
Riot also mentioned the “increasingly intense industry competition” as a risk, 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 widespread adoption as a payment method.
Riot wrote, “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 halving event scheduled for the first half of this year, the company’s revenue from mining operations will decrease, which could have a significant adverse effect on its operational performance and financial condition.
Riot also stated that the increasing support for climate change agendas from the U.S. government and the Texas government could pose 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 wrote:
The U.S. 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 demanding 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 Business After Bitcoin Halving” and “Energy Information Administration to Investigate Cryptocurrency Mining Power Usage, Citing Bitcoin’s Rise as Stimulating More Mining Activity.”
