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Is It Time To Reevaluate RIOT Amidst Cryptocurrency Slumps?

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Written by Timothy Sykes Reviewed by Jack Kellog Fact-checked by Ellis Hobb
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Riot Platforms Inc.’s shares have been influenced notably by the regulatory pressures on Bitcoin mining and the associated environmental concerns, leading to uncertainty in the crypto market. On Thursday, Riot Platforms Inc.’s stocks have been trading down by -3.7 percent.

Recent Market Movements

  • Bitcoin, known to heavily influence related stocks, dropped sharply, pulling cryptocurrency firms, including Riot Platforms Inc., along its downward trajectory.

Candlestick Chart

Live Update At 15:51:25 EST: On Thursday, November 21, 2024 Riot Platforms Inc. stock [NASDAQ: RIOT] is trending down by -3.7%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • The dip in major digital assets reflects the broader market’s challenges as trading volumes shot up, yet prices dwindled, affecting companies tied to the cryptocurrency market significantly.

  • U.S. stock indexes mirrored the uncertainty in digital markets, with mixed performances adding to the global trading narrative surrounding RIOT.

  • Despite the pauses in digital market gains, Riot Platforms remains integral to discussions on cryptocurrency volatility, impacting short-term investor sentiment.

  • The fluctuations in Bitcoin’s value have put a spotlight on companies like RIOT, provoking discussions on risk management in the current crypto climate.

Quick Overview of Riot Platforms Inc.’s Financials

As millionaire penny stock trader and teacher Tim Sykes, says, “The goal is not to win every trade but to protect your capital and keep moving forward.” Seasoned traders understand the importance of this mindset. It’s never about the short-term gains or the allure of striking it rich with one big trade. Instead, the focus remains on long-term success and sustainability. Adopting this philosophy can prevent rash decisions and mitigate the risks associated with emotional trading. By safeguarding one’s capital and maintaining a steady course, traders can weather market volatility and strive for consistent growth.

In recent financial reports, Riot Platforms Inc. displayed metrics that may raise eyebrows. Their key financial ratios indicate a challenging landscape: a negative EBIT and EBITDA margin, and significant revenue losses. Despite this, their balance sheet shows resilience with a substantial cushion in cash reserves at $355.7M as of the last quarter.

The company reported a net income loss from continuing operations, setting a somber tone in their performance narrative. Yet, their revenue through digital asset production and electricity sales suggests a two-pronged business approach. The moderate debt-to-equity ratio of 0.01 showcases financial prudence amidst an environment of volatility and losses.

Riot’s strategic cash management, alongside adequate working capital, could play pivotal roles in navigating the turbulent crypto waters, possibly buffering operational strains reflected in their negative EBIT of $-154.3M.

More Breaking News

With comparisons to its peers, Riot’s leverage, standing at 1.1, suggests a conservative borrowing mindset. While their profitability indices appear strained, their tactical recalibration within the crypto space suggests a potential avenue for turning tides, particularly if Bitcoin prices stabilize.

Earnings Report Analysis

Diving deeper, Riot Platforms’ recent earnings report underscores both the hurdles and stepping stones in its corporate journey. Total losses, evidenced through a continuously high cost of revenue compared to their total revenue, have shaped an arduous landscape. Investment cash flow remained under pressure from substantial outflows, a tale of capital expenditure and strategic buys, which have stretched finances but are likely aimed at expanding operational capability.

Margins remain a sticking point. Cost-cutting measures seem imperative as the company prioritizes sustaining operational liquidity and pursuing market share in a competitive, volatile sector. Stock-based compensation and general expenses continue to burden the income statement, emphasizing the challenge of scaling profitably.

The company’s report bears testimony to the delicate balance of aspiration and caution – investing in future growth while safeguarding present stability. Insights from their balance sheet, including a heavy countdown on depreciation, suggest a concerted effort to leverage assets for long-term rewards.

Market Impact of Recent Developments

The market’s dance with digital currencies is not unfamiliar to Riot, where Bitcoin’s fluctuating journey becomes a mirror reflecting the fortunes of crypto-linked companies. This recent downturn can be attributed not only to market mechanics but also prevailing investor sentiment, wary of heightened volatilities.

Riot has felt the ripple effects, with stock prices having shadowed Bitcoin’s highs and lows, threatening short-lived rallies amid a selling environment. The narrative of the crypto falls has burgeoned into discussions on whether these fluctuations present opportunities for counter-cyclical investments or indicative retreats.

Strategists within Riot must weigh the potential of crypto rebounds against comprehensive risk assessments. The ongoing crypto correction invites inquiries into long-term positioning and strategic flexibility in adopting or avoiding broader market trends.

Investors might need to reassess their positions based on Riot’s historical resilience during similar downturns, coupled with its current financial health.

Navigating the Volatile Crypto Market

The relationship between Riot Platforms and cryptocurrency dynamics presents a multifaceted discussion. Crypto booms and busts can lead to tectonic shifts within portfolios, emphasizing the need for vigilance in determining the sustainability of such investments.

Experts hint at careful engagement with Riot’s stock amidst current price stresses, where leverage on future crypto stability remains a contentious point. Market players considering allocations must tread carefully, mindful of Riot’s dependency on crypto paths while evaluating their broader impact on the company’s projections and market cap.

Embracing both skepticism and courage could determine the fortunes of those involved with Riot as strategic pivots align with the cryptocurrency market’s evolving narrative.

Final Thoughts

In closing, Riot Platform’s engagement with the crypto sector unveils a tapestry of opportunities and challenges. The connection to Bitcoin presents an ever-changing backdrop that predicates the need for strategic market interpretation and risk measurement. As millionaire penny stock trader and teacher Tim Sykes says, “Consistency is key in trading; don’t let emotions dictate your trades.” This mantra becomes crucial as voices advocating for a cautious approach balance those celebrating potential upsides, reflecting a duality central to Riot’s ongoing story. As the company charts its way forward, observers and traders alike await subsequent moves that could paint further hues onto the canvas of a tumultuous yet promising landscape.

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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”