In an evolving digital landscape where the stakes for cryptocurrency mining are continuously recalibrated, Riot Platforms emerges as a pivotal player, forecasting a challenging horizon for Bitcoin mining in the post-halving era. This perspective is particularly significant when juxtaposed with Chia Network’s strategic adjustments to block rewards and plot filter reductions set for 2024, as detailed in our related article.
Jason Les Riot Platforms CEO
Jason Les posted a great short on YouTube about the challenges and opportunities envisaged.
In the short, Les shares insightful perspectives on the company’s strategic preparation for the Bitcoin halving event. He emphasizes that Riot’s business model does not rely on the necessity of Bitcoin’s price increase, although they are optimistic about its future. The company has structured its operations to withstand adverse market conditions, focusing on maintaining a low cost of coin production to ensure positive operating leverage on Bitcoin, regardless of price fluctuations. This approach positions Riot to navigate through the challenges of the halving period and any market downturns effectively.
Les also highlights the anticipation of significant events in 2024, beyond just the Bitcoin halving, including potential ETFs, and the presidential election in the United States, suggesting that these factors combined will make it a memorable year. The video, succinctly capturing Riot’s readiness for various scenarios, reflects a strategic and forward-thinking approach to the evolving cryptocurrency landscape.
With regards to the halving, the role of Ghazaleh Barman, as Vice President for Financial Planning & Analysis, and Head of Mining, will certainly be key in steering Riot Platforms through this period. With a rich background in strategic operations and a keen insight into the blockchain ecosystem, Barman should be instrumental in navigating the complexities of sustaining profitability amidst the impending shifts in the mining landscape
- Riot Platforms warned that higher profitability is not guaranteed for Bitcoin (BTC) mining firms once the halving takes place.
- The caution comes despite the bullish forecasts on Bitcoin prices after the event.
- The company also cited regulatory uncertainty in the US and supply shortages as potential roadblocks in the optimization of its operations.
The Warning of Riot Platforms in Its Annual Report
Riot Platforms, one the largest players in the Bitcoin mining industry, posed a dire outlook for the coming halving. The company warned there will be “no guarantee” that it will bring about positive changes in its profitability.
“While Bitcoin prices have historically increased around these halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining rewards,” said Riot in its 2023 Fiscal-Year Annual Report submitted to the US Securities and Exchange Commission (SEC). “If a corresponding and proportionate increase in the price of Bitcoin does not follow future halving events, the revenue we earn from our Bitcoin Mining operations would see a decrease, which could have a material adverse effect on our results of operations and financial condition.”
The notice came even with the expected deployment of the new rigs Riot purchased that should bump their hash rate from the present 12.4 exahash per second (EH/s) to 28 EH/s by the end of 2024. The filing also noted an increase of their Bitcoin yield by 19.3% last year, growing from 5,554 BTC in 2022 to 6,626 BTC in 2023.
Regulatory Uncertainties in the US
Another cause of concern mentioned by Riot was the long-term effects of tightening regulations in the Bitcoin mining sector. The large-scale Bitcoin miner believes that the following factors could have a major effect on the industry:
- The climate-related disclosure requirements proposed by SEC in 2022, which is yet to be finalized.
- The broadened limit of state-chartered banks on engaging in digital assets pushed by the Federal Reserve’s Board of Governors.
- The pending regulatory framework for digital assets proposed by the Financial Services Subcommittee on Digital Assets in the US House of Representatives.
- The consequence on BTC transactions of spot Bitcoin ETFs approved in the US last January 2024.
- How the “emergency collection of data request” initiated by the Office of the Management and Budget (OMB) through the US Energy Information Administration (EIA) could be used in Bitcoin or cryptocurrency legislation.
- The ongoing deliberations by leaders on both the US House Financial Services Committee and US Senate Banking Committee regarding the passing of additional rules to prevent digital assets from being utilized in financing illicit activities.
Nonetheless, Riot assured that the State of Texas where its Rockdale and Corsicana Facilities are situated will “remain one of the most favorable regulatory environments for Bitcoin miners.” Likewise, the company guaranteed, “We continue to monitor and proactively engage in dialogue on regulatory and legislative matters related to our industry.”
Furthermore, the company warned that the ongoing supply chain crisis, aggravated by the strong demand for computer chips, may slow down its acquisition of new application-specific integrated circuit (ASIC) chips. Thus, this may have a significant effect on its future growth.
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