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RIOT: Navigating the Crypto Storm or Sinking?

Matt MonacoAvatar
Written by Matt Monaco Reviewed by Jack Kellogg Fact-checked by Tim Sykes
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Riot Platforms Inc. faces a sharp decline as mounting SEC scrutiny over its Bitcoin mining operations raises investor concerns about regulatory challenges. On Monday, Riot Platforms Inc.’s stocks have been trading down by -9.23 percent.

Cryptocurrency Turmoil Fundamentals

  • Bitcoin’s slide below $88,000 marks a turbulent shift after soaring above $93,000, impacting market stability.
  • The cryptocurrency market’s total value fell by 4.4%, signaling widespread investor uncertainty and volatility.
  • Major digital currencies, including Ethereum, Solana, and others, echoed Bitcoin’s downturn with notable declines.

Candlestick Chart

Live Update At 11:37:18 EST: On Monday, December 09, 2024 Riot Platforms Inc. stock [NASDAQ: RIOT] is trending down by -9.23%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Financial Snapshot: RIOT’s Recent Performance

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Earnings & Revenue Dynamics

Amidst the crypto whirlwind, Riot Platforms Inc. has been battling the financial currents. Their recent earnings report was a mixed bag. With a total revenue of $280.7M, the company demonstrates growth but not without major setbacks. The profitability ratios paint a stark picture of challenges; the gross margin sits at a modest 26.1%, hinting at underlying operational struggles.

Despite a brave display of $118.49M in gross profit, Riot faces significant losses, notably a negative EBIT margin of -120.5% and a pretax profit margin of -42.4%. These indicators reveal a company grappling with high costs relative to revenue, likely driven by substantial investments in technology and infrastructure to maintain competitive crypto mining capabilities.

Cash Flow & Financial Health

Looking closely, RIOT’s financial resilience becomes clearer through its considerable current ratio of 5.7 and a quick ratio of 4.5, indicating strong liquidity to cover short-term obligations. However, this strength is partly due to a significant influx of stock issuances amounting to over $219M.

Conversely, free cash flow remains a concern, with a negative position of $131.8M. Investing in growth and infrastructure has, unfortunately, led to cash outflows that potentially surpass operational cash inflows, which requires strategic balancing to avoid fiscal pitfalls.

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Valuation Insights

Valuing Riot amidst such volatility is tricky; the company’s price-to-sales ratio stands at 13.75. This implies that investors are willing to pay a substantial premium for each unit of Riot’s revenue, perhaps a testament to the anticipated potential returns from the ever-evolving crypto domain.

Notably, the balance sheet shows total assets of $2.92B, underlining Riot’s ambitious resource expansion efforts. Yet, shareholder equity suggests a precarious financial sword, poised between a commendable total equity position of $2.75B and retained earnings that tell tales of accumulated losses hitting a staggering -$826M.

Market Impact: Understanding the Price Fluctuations

Bitcoin’s Influence

Riot’s relationship with Bitcoin is symbiotic. As a mining entity, swings in Bitcoin prices directly affect Riot’s revenue viability. Bitcoin dipping below the crucial $88,000 threshold likely induces investor skittishness, akin to sailing into a storm while watching the ominous clouds darken the sky.

Such dynamics elevate Riot’s stock’s vulnerability to crypto market sentiment, rendering it susceptible to rapid changes in market confidence and behavior, basically a reflection of volatility in digital asset trends.

Investor Sentiment and Technological Pivot

The overall decline in cryptocurrency market capitalization isn’t merely a statistic; it translates into raw sentiment among investors who crave stability. Riot’s strategic responses—whether idealistic pivots or concrete innovations—could stand as beacons for regaining investor trust.

However, current index developments suggest cautious optimism. The intricate web of market complexities requires savvy maneuvering, mindful of technological disruptions and advancements in crypto mining efficiency and cost management.

Potential Impact and Conclusion

Riot Platforms Inc. hovers in a delicate balance of ambitious expansion against the backdrop of a notoriously volatile market. Traders watch with eagle eyes for signs of either promising upward momentum or the ominous pull of further declines that could dictate future paths. As millionaire penny stock trader and teacher Tim Sykes, says, “You must adapt to the market; the market will not adapt to you.”

Key to Riot’s prospects will be its ability to balance trading capital influxes with sustainable operations, maintaining a steady ship while navigating the tempestuous waters of cryptocurrency market fluctuations.

Only time will reveal whether Riot can effectively weather the crypto storm or become an anchor weighed down by the grandeur of its own ambitions. Nevertheless, the unfolding narrative continues to pulse with expectation and intrigue.

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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 .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

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”