With the rise of Bitcoin (BTC), mining companies are also doing good business. With the high Bitcoin price, profits are finally being made again after a long bear market and mining companies are busy preparing for the upcoming Bitcoin halving. This also applies to the listed Riot Platforms, a renowned American miner.
But Riot warns of risks in its annual report. The company says it is concerned about the ongoing global chip shortage. Riot expects that the costs of ASIC mining equipment will continue to be high for the time being.
The global chip shortage
The Bitcoin mining sector is a very competitive sector. After the upcoming Bitcoin halving, this competition will only increase. This requires miners to constantly increase the available hashing power, Bitcoin mining computing power. And that means investing in new mining equipment.
“To survive in this highly competitive industry, we must continue to invest in new miners. Both to replace old ones and to scale our hash rate to keep up with the growing global network hash rate.”
According to Riot. The mining sector relies on highly specialized ASIC chips that can be manufactured by a very select group of manufacturers.
“The current global supply chain crisis, coupled with increasing demand for computer chips, has led to a shortage of semiconductors.”
The company said it expects this ongoing shortage to cause long-term problems for the company’s operations. In December, Riot purchased more than 66,000 miners from MicroBT worth $291 million. This was the largest investment in mining equipment in the company’s history.
Other risks
In addition to the ongoing chip shortage risk, Riot is also dependent on the Bitcoin price. Demand for Bitcoin could also stagnate or decline, the company said. This in turn would put a strain on the balance sheet.
Regulation is also a factor that has a major impact on the American mining industry. New climate laws in Texas and the United States as a whole could pose obstacles.
“New laws and increasing regulations related to climate change could result in significant costs for us and our suppliers. This includes costs associated with increasing energy demand, capital requirements, environmental assessments and other costs associated with such regulations.”