Benzinga - Riot Platforms Inc. (NASDAQ:RIOT), a company that profited from Bitcoin (CRYPTO: BTC) mining during the crypto boom of 2021, is now facing substantial losses and relying on energy credits to control costs.
What Happened: The Texas power grid operator the Electric Reliability Council of Texas (ERCOT), awarded Riot $31.7 million in energy credits last month after the company voluntarily curtailed its energy consumption during a severe heatwave.
Interestingly, the value of these energy credits far exceeded the worth of the 333 Bitcoins mined by Riot in August, which amounted to approximately $8.9 million. The credits significantly reduce Riot’s mining costs and contribute to the company’s position as one of the industry’s lowest-cost Bitcoin producers, according to Jason Les, Riot’s CEO, as reported by CNBC.
This marks a significant strategy shift for Riot, as the cryptocurrency market reversal in 2022 resulted in net losses of over $500 million for the year. In the latest quarter, the company incurred a loss of $27.7 million. Despite the sector’s struggles, Bitcoin’s recovery in 2023 has boosted Riot’s stock by around 230% so far. However, it remains significantly below its peak price of $77.90 in 2021.
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Why It Matters: Ballooning energy prices have also negatively impacted the profitability of the sector, prompting companies to seek alternative sources of income.
ERCOT’s relationship with Bitcoin miners, through established “demand response” programs, allows them to voluntarily reduce power consumption to avoid overstressing the grid during peak demand periods.
Price Action: At the time of writing, BTC was trading at $26,267.75, up 1.42% in the last 24 hours, according to Benzinga Pro.
Photo by Gaston Cerliani on Shutterstock
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