- Hedge fund predicts that Bitcoin miners’ shares will go to zero.
- BTC and MSTR have performed better than overall BTC miner shares on a YTD basis.
After going short on MicroStrategy’s MSTR stock in March, TradFi hedge fund Kerrisdale Capital is back with another short strategy, this time targeting Bitcoin miner Riot Platform’s RIOT share.
So, what’s the beef with RIOT? Kerrisdale Capital’s CIO Sahm Andrangi told Yahoo Finance that,
“Our investment thesis is that this sector is not going to be around in five years,’
On X (formerly Twitter), the hedge fund slammed Riot further and called it a ‘dysfunctional hamster’ and ill-equipped to offer better rewards to shareholders.
‘Like other US-listed miners, $RIOT’s biz model is a dysfunctional hamster wheel of cash burn, which is why it loots retail shareholders with non-stop ATM issuance to fund operations. Even with $BTC near all-time highs, post-halving $RIOT’s mining ops aren’t profitable.’
Interestingly, Andrangi was against the whole Bitcoin mining sector, termed it the ‘stupidest business model’, and predicted that it would ‘ultimately go to zero.’
Bitcoin as a hedge against BTC miners
In such a bearish scenario, the hedge fund maintained that BTC would always perform better against BTC miner shares. So, it would be used as a hedge against BTC miner shares – long BTC, short BTC miners.
However, since Kerrisdale Capital’s last short strategy against MSTR in March, the stock has soared 37%.
This tipped some market watchers to adopt a contrarian approach and ‘thank’ the fund for calling BTC miners’ shares ‘bottom’ for the rest of 2024.
Another X user outrightly wondered how flawed the fund’s strategy was.
‘This genius is shorting #Bitcoin miners and $MSTR heading into the greatest crypto bull market in history.’
However, the fund was right on BTC outperforming miner shares. On a YTD (year-to-date) basis, MSTR was up 147%, and BTC had 67% gains as of press time.
However, RIOT was down 37%, while overall BTC miner shares tracker, based on Valkryie Bitcoin Miner ETFs (WGMI), was modestly up only 6% over the same period.
Source: BTC vs. BTC miner shares performance, TradingView
That said, the WGMI has been trending higher as BTC rises. But, it remains to be seen whether the hedge fund’s ‘BTC miners going to zero’ projection will turn out.