Wherever Bitcoin (CCC:BTC-USD) goes, that’s where the miners will go as well. This principle should be kept in mind at all times if you’re planning to invest in Riot Blockchain (NASDAQ:RIOT), as RIOT stock is bound to follow the Bitcoin price much of the time.
Moreover, just as gold-mining stocks typically provide leverage to the moves of gold, the Riot Blockchain share price will often exaggerate Bitcoin’s price moves.
Whether that’s a good thing or not, is a separate matter entirely. We’re in the midst of an extended “crypto winter” in which Bitcoin and other cryptocurrencies are getting battered.
Yet, this could present a terrific opportunity for contrarian blockchain-sector investors. Just maybe, it’s the perfect time to mine for big profits amid a sea of red in the crypto-sphere.
A Closer Look at RIOT Stock
Over the past year or so, RIOT stock has flown high, but gone absolutely nowhere.
How is this possible? As we’ll see, the stock has gone on a round trip that’s been great for short-term traders but frustrating for long-term investors.
In late 2020, RIOT stock was trading near the $15 level. The next thing you know, in early 2021, social-media traders were buying practically anything and everything: stocks, cryptocurrency, silver, you name it.
It was a weird, wild time and unfortunately, some latecomers ended up holding the bag. After the Riot Blockchain share price topped out at $79.50 in February 2021, it was all downhill from there.
Well, maybe not all downhill, as there were quick share-price pops along the way. All rallies were quickly sold off, though, and RIOT stock landed at $14.99 on Jan. 21, 2022.
So, there’s your round trip from $15 to nearly $80 and back. Along the way, Bitcoin pulled mining stocks this way and that way – and lately, the trend has definitely been to the downside.
From Russia, but Not with Love
So, what’s causing the big crypto crash, anyhow?
Not long ago, a report titled “Cryptocurrencies: trends, risks, measures” (don’t bother trying to read it unless you’re fluent in the Russian language) was presented during an online press conference with Elizaveta Danilova.
She’s the director of the Bank of Russia’s Financial Stability Department, and neither she nor the report offered good tidings to crypto traders.
With echoes of prior allegations from China’s government and the U.S. Congress, the Russian report declares that cryptocurrencies are volatile and widely used in illegal activities such as fraud.
Moreover, the Bank of Russia, which has already barred mutual funds from investing in cryptocurrencies, is suggesting introducing penalties for breaking that ban.
Not only that, but the Bank of Russia asserted that the country needs new laws and regulations to effectively ban cryptocurrency-related activities.
It’s probably safe to assume that this would include a ban on crypto mining, if it’s actually implemented. However, the Bank of Russia is not suggesting banning ownership of cryptocurrency by private citizens, according to Danilova.
Positive Notes from Analysts
Does this mean that it’s time to dump your RIOT stock shares and run for the hills? Not necessarily, as some Wall Street experts seem to remain optimistic.
Northland analyst Michael Grondahl, for example, cited Riot Blockchain’s “high developed capacity, robust outlook for future capacity, leading hash rates and number of Bitcoin mined, and low cost of production.”
With that, Grondahl issued an “outperform” rating and a $30 price target on the Riot Blockchain’s shares.
Meanwhile, H.C. Wainwright analyst Kevin Dede observed Riot Blockchain’s intention to expand its power capacity to 1.5 gigawatts. In light of this, Dede believes that the recent cryptocurrency price drop “offers an entry point.”
With that in mind, Dede rated RIOT stock a “buy” while issuing an ambitious $50 price target.
The Bottom Line
Clearly, not everyone is overly concerned about the cryptocurrency crash and Riot Blockchain’s future prospects.
Only time will tell how the news from Russia unfolds. Traders of all crypto-mining stocks will need to keep a close eye on these crucial developments.
If you’re leaning bullish on cryptocurrency, though, then there may be a ripe dip-buying opportunity here.
And if you’re seeking leveraged exposure through a powerful mining operation, Riot Blockchain is as solid a pick as any.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.