(Bloomberg) -- Bitcoin mining is a tough business. That means cryptocurrency enthusiasts should be buying tokens instead of miner stocks, according to Kerrisdale Capital Management LLC.

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The strategy is part of bets the short-seller has been making across the industry with its latest short position targeting Riot Platforms Inc. The thesis is that investing in a business built to corral unpredictable revenue in a tremendously competitive environment is flawed when crypto believers can instead buy Bitcoin outright.

Shares of the Castle Rock, Colorado-based company fell as much as 8.9% Wednesday after Kerrisdale founder Sahm Adrangi’s report highlighted Riot’s shareholder dilution through selling stock as Adrangi penned letters to Texas government officials. The focus of those missives were centered on Texas energy laws that he says pay Riot to taper their energy usage when prices spike.

A Riot representative didn’t immediately respond to a Bloomberg News email and call seeking comment.

“All the Bitcoin miners are shorts, the whole business model especially with current valuations don’t make sense,” Adrangi said by phone. Crypto-mining is a commodity business and “the barriers to entry are almost zero if you have access to a computer and energy.”

US miners are exposed to global competition as new mining projects pop up around the world which will “only continue to intensify,” the report said. The ability for investors to buy low-fee exchange-traded funds and exchange-traded products has also made the need to search for a Bitcoin proxy irrelevant, the report argues.

This isn’t the first time a cryptocurrency-exposed company was caught in Kerrisdale’s crosshairs. In March, the firm promoted a pair trade of shorting Michael Saylor’s MicroStrategy Inc. while taking a long Bitcoin position.

“None of the reasons commonly provided for MicroStrategy’s relative attractiveness justify paying well over double for the same coin,” Adrangi wrote at the time.

That’s been a winning bet for the firm, before accounting for any costs to take the position. MicroStrategy shares are down around 13% since the report’s publication while Bitcoin has edged higher by more than 2%.

There are risks, however, that Bitcoin miners can pivot their business models and attract investors as well as strategic buyers.

Core Scientific Inc., which emerged from bankruptcy earlier this year, soared 40% on Tuesday after announcing it signed a series of 12-year contracts with CoreWeave Inc. Closely held cloud computing provider CoreWeave was then said to have offered to buy Core Scientific for about $1 billion, Bloomberg News reported citing a person with knowledge of the matter.

--With assistance from Carmen Reinicke.

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