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Riot Platforms indicated in the risk disclosures section of its annual report that it expects to maintain high costs for ASIC Bitcoin miners until the Chip crisis is resolved.
The mining company, Riot Platforms, stated in its latest annual report that the ongoing chip shortage, the need to continuously increase the hash rate, and deepening environmentally friendly policies in the USA could potentially affect the company’s balance sheet.
Riot, as one of many Bitcoin mining firms preparing for the upcoming halving event, highlighted more than 13 major risks related to the future profitability of Bitcoin mining in its annual 10-K file dated 23rd February, which included the risk factor disclosures section.
One of the risk factors emphasized by Riot was the ongoing global chip crisis, due to the limited number of manufacturers capable of producing the highly customized ASIC chips used in mining.
“The ongoing global supply chain crisis, combined with increased demand for computer chips, has created a shortage in semiconductors,” Riot indicated that this situation could impact mining operations in the long term.
In December, Riot agreed to purchase 66,560 miners worth $291 million from the manufacturer MicroBT. According to the company’s CEO, Jason Les, this was the “largest hash rate order” in the company’s history.
In Riot’s latest annual report, it indicated that the costs of procuring and setting up mining machines will continue to be “higher than normal” until the chip shortage crisis is resolved.
However, as Riot indicated, even if ASIC miners have access, they may still encounter “design flaws”.
The company stated that they had software and firmware problems in the past when trying to adapt their miners to work in “liquid-cooled” environments and they might face similar problems in the future.
In the meantime, Riot noted a risk from an increasingly competitive industry. This means that as the global hash rate increases, the company needs to continue increasing its hash rate to maintain its market share.
“To be competitive in this highly competitive industry, we believe we must continue to acquire new miners to renew miners lost due to ordinary wear and tear and other damage, and to increase our hash rate, so we can cope with the growing global network hash rate.”
In the meantime, Riot indicated that Bitcoin faces “significant scaling barriers” that could hinder its ability to become a widespread payment method.
Riot indicated that “demand for Bitcoin could stagnate or decrease,” which could negatively impact the price of Bitcoin and thus weaken Riot’s balance sheet.
$RIOT True Cost of Mining: $23,268
Not going to do a full $RIOT write up tonight, but wanted to share what I’m seeing as their True Cost of Mining based on their 10-K results for the full 2023 year.
The only major nuance I will share right now from my adjustments shown below is… pic.twitter.com/gSWYO6AIUr
— Ben Werkman (@BenWerkman) February 24, 2024
“An increasingly climate change-friendly policy in Texas and the United States governments could also pose challenges for the company,” it said.
“New laws and increasing regulations related to climate change could bring significant costs for both us and our suppliers. These costs could include increased energy needs, investment in capital equipment, environmental monitoring and reporting, as well as other costs necessary to comply with such regulations.”
Riot indicated that it could lose its competitive edge if subjected to more stringent regulations compared to its counterparts in other regions.
Riot and the Texas Blockchain Council (TBC) received a favorable decision from a United States District Judge for a lawsuit filed against several US energy officials who allegedly requested invasive data collection from crypto miners.
Meanwhile, Riot mined a total of 6,626 BTC in 2023, increasing Bitcoin production by 19%, which was worth $341.4 million at current prices.
The company’s average cost for Bitcoin mining in 2023 also decreased by 33% to $7,539.
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