Despite Strong Production, Avoid Riot Blockchain Amid Crypto Volatility

RIOT stock - Despite Strong Production, Avoid Riot Blockchain Amid Crypto Volatility

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Riot Blockchain (NASDAQ:RIOT), a Bitcoin (BTC-USD) mining company in North America, announced its March 2022 production update and the news is very positive. RIOT stock saw a record number of 511 Bitcoin produced, an increase of 176% compared to March 2021 production of 185 Bitcoin.

As the company generates money by mining Bitcoin, this record production should translate to higher revenue. Theory says it should also lead to better profitability and that RIOT stock should rise as a result.

But shares of Riot Blockchain have fallen by nearly 17% in the past five days, closing at $15.91 on April 11. That means the good news related to the latest production update did not move the shares in a positive direction.

Now, the mining company faces a mix of risk factors. Bitcoin has tumbled nearly 13% in the past seven days and is trading now at $40,000. Bitcoin mining stocks like Riot closely follow the price of BTC. Should its price continue to be weak in 2022 amid rising interest rates and a risk-off investor sentiment, this will be bad news for RIOT stock, which holds Bitcoin as assets on its balance sheet.

Having an asset on your balance sheet means you want it to appreciate over time, not lose value. The financial results for the full year ended Dec. 31, 2021 showed the mining company increased its Bitcoin holdings “by 353% to 4,884 BTC as of December 31, 2021, compared to 1,078 BTC as of December 31, 2020.” Bitcoin was trading at about $48,000 in early January 2022, so Riot Blockchain has already a loss of approximately 17% holding Bitcoin on the balance sheet.

Riot Blockchain acquired North America’s largest Bitcoin mining facility, Whinstone, back in May and has increased its hash rate capacity by 444% in 2021 compared to 2020. The company has plans to further expand its number of miners in 2022, investing more in capital expenditures when selling, general and administrative expenses in 2021 increased 753% year-over-year.

The firm is unprofitable and has been burning cash over the past five years. It’s a capital-intensive mining business that’s now focused on the present and future of Bitcoin, which makes it a highly concentrated business. That means RIOT stock is far too risky.

On the date of publication, Stavros Georgiadis, CFA  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 Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.

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