Despite Strong Production, Avoid RIOT Stocks Amid Crypto Volatility

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

As the company generates money by mining Bitcoin, this record production should translate into increased revenue. The theory says that this should also lead to better profitability and RIOT stock should rise accordingly.

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

Today, the mining company is faced with a set of risk factors. Bitcoin has fallen nearly 13% in the past seven days and is now trading at $40,000. Bitcoin mining stocks like Riot follow the price of BTC closely. If its price continues to be weak in 2022 amid rising interest rates and investor risk sentiment, that will be bad news for RIOT stock, which holds Bitcoin as an asset on its balance sheet.

Having an asset on your balance sheet means you want it to appreciate over time, not lose value. 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 Dec. 31, 2021, from 1,078 BTC as of Dec. 31, 2020.” Bitcoin was trading at around $48,000 at the start of January 2022, so Riot Blockchain already has a loss of around 17% holding Bitcoin on the balance sheet.

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

The business is unprofitable and has been burning cash for the past five years. It is a capital-intensive mining company that is now focused on the present and future of Bitcoin, making it a very focused business. This means that the RIOT stock is far too risky.

As of the date of publication, Stavros Georgiadis, CFA had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Stavros Georgiadis is a CFA charter holder, equity research analyst and economist. He focuses on US stocks and has his own stock market blog at He has written various articles for other publications in the past and can be contacted at Twitter and on LinkedIn.

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