Riot stock chart vs BTC

Riot Blockchain Stock Sinks. Is It A Buy?

Riot Blockchain (NASDAQ: RIOT) is currently down 2.54% at $31.37. This is after it rocketed $0.51 to over $79.50 this past year.  Yes, those numbers are correct. This morning the RIOT stock is down a little over 4%.

This past year’s sudden and massive increase is due to the price of Bitcoin (CCC: BTC) surging from $8000 to $58000….and you guessed it that RIOT stock dropped again recently is due to Bitcoin dropping to 32,340.

The primary reason why RIOT stock is falling is that China intensified its crackdown on mining activities. The ongoing high volatility in bitcoin renders it untenable for most potential mainstream users as a means of exchange or unit of account, and a questionable repository of value, while concerns about its environmental impact and legitimacy (underworld use of cryptocurrencies and the endemic problem of scams) are other deterrents.

Crypto Mining

Investors might be asking, what is crypto mining? The short answer is that the term crypto mining means using computers to solve cryptographic equations on which bitcoin is based. When the equations are solved, they get a bitcoin. The process validates data and adds it to a public ledger known as a blockchain. Basically, they run computers to solve equations, that when solved are converted to bitcoins.

Crypto mining is a very complicated and risky process for several reasons. First, it relies on the assumption that bitcoin and other cryptocurrencies will increase in value. Second, it requires a massive amount of computers, cooling equipment, and technology to run. Lastly, it will only get harder for miners to “solve” equations due to the way cryptocurrencies are designed.

All things considered, it is an excellent way for investors to get into cryptocurrencies indirectly if they understand the risks.

Riot stock chart vs BTC
Riot stock chart vs BTC

Is Riot Blockchain A Buy?

Riot is the biggest and most well-known crypto mining company.  The company was founded in Castle Rock, Colorado in 2000 and has seen a rocking stock price from $0.51 to over $79 in the last 52 weeks.  This has to be the best trade ever for investors that bought in last year.

The primary reason for the huge stock price increase in bitcoin’s price increase.  More importantly, Riot positioned to be the company positioned at the right time to take advantage of the cryptocurrency price increases with planned expansions and proven capability.

Riot just announced that it is investing even more into bitcoin mining “an expected 65% increase in bitcoin mining hash rate capacity resulting from the purchase and future deployment of 15,000 S19 Pro and S19j Pro Antminers from Bitmain Technologies Limited.”

This means Riot will have even more capacity to mine.

If you compare Riot stock to bitcoin prices (see chart above), you will see that Riot stock is very correlated to the price of Bitcoin – but RIOT is significantly higher in percent. Investors should understand the price of bitcoin is correlated and that there is a premium to the stock, however, the gap appears to me to be very large.

Riot Blockchain Bottomline

Is Riot Blockchain stock a buy? Riot stock is not a BUY right now for most investors. However, it could be a great opportunity to buy longer-term calls or a buy if you think Bitcoin will go up in the future. There may be also an opportunity for a quick swing trade as well.

A few years ago when bitcoin dropped in prices crypto mining companies went out of business. A fall in bitcoin prices could devastate Riot’s stock price. In addition, the stock is currently overbought on most of the technical charts.  I personally saw this happen nearly a decade ago with gold mining companies and they dropped fast when gold’s price dropped. Now that gold’s price is back up, so are the mining companies.

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