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Is Riot Platforms the Next Big Bet for Cryptocurrency Investors?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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Riot Platforms Inc. is riding a wave of investor enthusiasm, bolstered by the news of its impressive hashing power and strategic plans in renewable energy. On Friday, Riot Platforms Inc.’s stocks have been trading up by 6.33 percent.

International Developments:

  • Riot Platforms and Bitfarms Ltd. have ended a hostile takeover attempt with a settlement that includes board changes at Bitfarms. Riot holds 19.9% of Bitfarms’ common shares.
  • MKM Partners recommends Riot Platforms as a top Bitcoin mining pick, impressed by increased production and hash rates.
  • Riot Platforms reports 28% higher Bitcoin production in September compared to August, with 69% better operational uptime.

Candlestick Chart

Live Update at 13:33:27 EST: On Friday, October 11, 2024 Riot Platforms Inc. stock [NASDAQ: RIOT] is trending up by 6.33%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Riot Platforms Recent Financial Performance

Riot Platforms, a frontrunner in Bitcoin infrastructure, has recently showcased impressive growth in its Bitcoin production. In September 2024, Riot achieved a remarkable 28% increase compared to August, reflecting its growing prowess in the cryptocurrency mining space. With a strengthened hash rate of 28.2 EH/s, Riot stands out as a leading player in the industry.

Looking at financial metrics reveals a mixed bag. Riot’s revenue stands at approximately $280.68M, demonstrating a significant upward trajectory over the past few years. However, profitability metrics, including EBIT and EBITDA margins, are negative, indicating ongoing challenges in turning revenue into profit. The company’s balance sheet is solid, with an impressive current ratio of 9.7, implying a strong ability to cover its short-term liabilities.

Despite these promising figures, the company faces hurdles that need addressing. For instance, the debt-to-equity ratio is minimal at 0.01, but high cash outflows from investing activities, particularly in acquiring business and investment properties, showcase ambitious and risky growth endeavors. Net income has suffered with substantial losses, emphasizing the impact of aggressive expansion strategies.

More Breaking News

From a trading standpoint, Riot’s stock price has seen volatile movements. The recent data shows RIOT trading with fluctuating highs and lows but closing at $8.23 on Oct 11, 2024. This reflects market confidence swinging between optimism over future gains in Bitcoin management and prudent skepticism due to profitability worries.

Crypto Market Surge and Its Effect on Riot Platforms

The global cryptocurrency market is currently experiencing a significant rally, with Bitcoin prices soaring past remarkable thresholds. This surge has positively influenced several companies involved in cryptocurrency markets, including Riot Platforms. Riot’s increased Bitcoin production, mirrored by the overall growth in digital asset values, depicts a future that could be very bright, albeit with some clouds of uncertainty.

This current upward trajectory in the cryptocurrency market is buoyed by renewed investor interest, regulatory movements, and statements by influential figures like Vice President Kamala Harris, who indicates potential support for AI and crypto investments. These developments portend a future environment ripe for innovation and growth in the crypto sector, with Riot Platforms being strategically positioned to capitalize.

A Closer Look at Key Drivers

Riot’s collaboration with Bitfarms, one of the critical recent developments, signals a strategic shift towards sustained growth and stability. By solidifying its position with a near 20% stakeholding, Riot is not only securing its influence but is also signaling its intent to optimize resources and maximize shareholder value through collaboration and forward-thinking board nominations.

Macquarie’s ‘Outperform’ rating and a price target of $15 further validate Riot’s strategic direction and vertical integration capabilities, pinpointing it as a robust candidate for Bitcoin mining. On the other hand, Roth MKM’s Buy rating underscores Riot’s operational enhancements, emphasizing its potential as a dedicated pure-play BTC investment.

Future Outlook and Potential Challenges

While Riot Platforms shows promising growth and potential, numerous challenges are lurking around the corner. The company’s profitability margins remain negative, hinting at underlying cost structures that need addressing. However, with an aggressive investment approach and expansion in its infrastructure, Riot may be betting on future economies of scale to tip the profitability balance in its favor.

Market dynamics also pose external challenges. As witnessed, Bitcoin prices fluctuate, impacting Riot’s valuation directly. Moreover, regulatory uncertainties in the crypto world could sway investor sentiments rapidly, making swift adaptability crucial.

Conclusion: Weighing the Risks and Rewards

Riot Platforms stands on the cusp of significant growth driven by its strategic investments and enhanced Bitcoin production capabilities. Yet, the path is fraught with risks arising from profitability struggles, market volatility, and regulatory challenges. Investors need to balance the potential rewards against the inherent risks in this fast-evolving digital asset arena. Could Riot Platforms become the next significant player in the cryptocurrency sector? The pieces are surely in motion. Only time will tell if they fall into place.

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”