Financial headlines have been dominated by cryptocurrencies over the past year, whether it has been Bitcoin hitting all-time highs or the rise and fall of Dogecoin.
Cryptocurrencies are very volatile and many people want to find alternative ways to invest without having as much exposure. Riot Blockchain (NASDAQ: RIOT) is a Bitcoin mining company that has been getting a lot of attention from investors recently.
The bull case for Riot Blockchain
Riot Blockchain has been well-positioned to take advantage of the significant rise in Bitcoin’s price over the past year, having mined 675 Bitcoins in Q2, up 38% from Q1. It also produced record net income of $19.3 million, or $0.22 per share, in Q2.
Riot Blockchain total cash and Bitcoin of $195.4 million in the second quarter. The company forecasts that it will increase production by about 50% by the end of 2022 due to investments in additional ASIC miners. Its mining operations as a whole are very efficient. Its hash rate is very good, which is the determining factor in how much mining companies will get paid for their efforts.
The bear case for Riot Blockchain
A lot of talk recently has been about the high level of fossil fuel consumption needed to mine Bitcoin. The Insider just reported that Bitcoin mining consumes 0.5% of the entire electricity that is used globally, which is seven times the amount Google does. Tesla CEO Elon Musk also backtracked regarding the EV company’s acceptance of Bitcoin as a payment method due to energy usage concerns.
It is getting harder to mine Bitcoin as every few years the reward for mining a Bitcoin is halved. Therefore, to maintain mining rates, more computing power is needed. Competition is also formidable, with Chinese miners accounting for approximately 70% of Bitcoin production.
The success of Riot Blockchain is also very closely linked to the price of Bitcoin, which will be a concern for investors in this volatile marketplace.
Finally, the likes of Ethereum are now challenging Bitcoin as the king of the crypto space. Only those who are confident of continuing significant rises in the price of Bitcoin will be looking at investing in Riot Blockchain for the long term.
So, should I buy Riot Blockchain stock?
The Riot Blockchain share price is up almost 100% year-to-date but has fallen 16% over the past six months and continues to do so, which makes sense as Bitcoin dropped in the last few months too.
The company’s fortunes are very closely linked to the success of Bitcoin and its current assets do not seem to justify its $3.1 billion market cap. You would need to be very bullish on the future of Bitcoin to invest as it looks like it’s going to be a bumpy ride.
Where does Riot Blockchain have its facilities?
Riot Blockchain’s operations are currently based in the Coinmint digital currency data center in Massena, New York, and in Houston, Texas.
Who is the CEO of Riot Blockchain?
Jason Les is the CEO of Riot Blockchain.
Is Riot Blockchain profitable?
Yes, Riot Blockchain recorded net income of $19.3 million in Q2.
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Contributing Writer at MyWallSt
Andrew is a contributing writer to MyWallSt. He is a full-time finance writer, having spent time working in the industry. He studied Economics and Finance and has been fascinated with the financial markets since his teens. The first stock that Andrew bought was Apple, reflecting his love for its products.