The cryptocurrency industry is still fairly new when compared with the more traditional asset classes and its growing rapidly. Blockchain technology is the driving engine of the crypto space, it enables the maintenance of a secure and decentralized ledger of transactions.
In order to produce new currencies computers are used to solve complex computational problems which validate the transactions on the blockchain. This is called ‘mining’ and creates new coins which are then distributed among the miners.
With the crypto market being worth over $1.7 trillion, companies were formed among other things to focus on the mining aspect of coin creation, with new ones springing up and joining the fray. Finbold has analyzed this new field and pinpointed a publicly-traded crypto mining company that is growing faster than the others.
Riot Blockchain Inc. (NASDAQ: RIOT)
RIOT is more than just a crypto mining company, it also hosts mining equipment for institutional clients as well as designs and produces electrical equipment for Bitcoin mining. These two additional revenue streams are done through 2 subsidiaries, Whinestone, and ESS Metron, respectively.
The company increased its revenues by 1,665% to $213.2 million in 2021 and reduced its loss to $7.9 million compared to the loss in 2020 of $12.7 million. Metrics that are specific to the crypto mining sector also rose dramatically, namely hashing capacity increased by 444% which means more coins can be mined resulting in more profit.
Shares of the company as well as profitability depend highly on the price of Bitcoin the most prominent crypto coin in the market. With regulatory issues in China surrounding the crypto space Bitcoin plummeted from all-time highs to below and around $40,000 per coin.
This has had a detrimental impact on the share price of RIOT which plummeted from the November 2020 highs to now trade below all daily Simple Moving Averages. Shares seem poised to test the below $13.5 resistance and if it holds a leg up might be seen. Investors looking for an entry point should track the stock since it lost over 6% in the last trading session.
Analysts covering the stock remain bullish giving the stock a strong buy rating despite the lackluster performance of the shares. For the next 12 months, the average price they see is $46 which is an eyewatering 232.62% higher than the current trading price of only $13.95.
How safe is it
Unlike ‘traditional’ stocks the crypto miners have a specific niche whose macro and micro events revolve around the price of cryptocurrencies. Of course, some traditional elements like investing in improving capacity, transparency and stewardship play an important role but they seem to take a backseat to the crypto prices.
As long as Bitcoin is doing well market participants can expect Riot and other miners to rally. Inflation might actually be useful as Bitcoin is often likened to digital gold and has become a sort of safe haven for the younger generation of investors.
Just like crypto, miners have a tendency to trade choppy and with huge fluctuations. Currently, the stock is priced attractively for investors looking to make an entry, but risk appetite needs to be gauged because there is the possibility of more volatility in the price in the near future.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.