Crispus Nyaga
Riot Platforms (RIOT) stock price has broken a bad record for the year. It has retreated in the past nine straight days and reached a low of $10, its lowest swing since July 12. It was its longest losing streak since January when it tumbled for six days straight.
Bitcoin price retreat continues
Riot Platforms, formerly known as Riot Blockchain, is one of the biggest players in the Bitcoin mining industry. It is the third-biggest mining company in the world in terms of market cap after Marathon Digital and CleanSpark.
Riot is also the fifth-biggest corporate Bitcoin holder in the industry after MicroStrategy, Marathon Digital, Tesla, and Coinbase. It holds 9,333 coins valued at over $605 million.
Therefore, the company does well when Bitcoin is thriving and vice versa. A higher BTC price means that the company will publish strong results. It also means that its balance sheet will do better.
Riot Platform’s sell-off continued this week after Bitcoin lost momentum. After soaring to a weekly high of $70,000 on Monday, the coin dropped below $64,000 on Monday.
Riot Platform’s recent updates
Riot, like other Bitcoin mining companies, has been under pressure in the past few months. The main catalyst for this weakness is April’s halving event that reduced the block rewards offered to miners.
Since then, Riot and other miners have produced fewer coins and this trend will continue until they boost their output. Riot Platforms produced 844 coins in the second quarter, a 52% decline from the 1,772 coins it mined in the second quarter of last year.
These companies will need to spend money to acquire more mining machines to deal with the halving event. Another approach will be to spend money on acquisitions. Riot Platforms has been working to acquire Bitfarms, a company known for its low mining costs.
Bitfarms has rejected the offer and executed a posion pill to prevent Riot from increasing its stake and forcing a sale. Still, Riot has continued accumulating the shares, including this week.
Riot has also continued with its acquisitions. Earlier this week, it acquired Block Mining in a $92 million deal. Block will add 1 EH/s to Riot’s with a capacity for up to 16 EH/s by the end of next year.
Cipher Mining, another Bitcoin mining company, is exploring a sale while Core Scientific rejected a bid from Coreweave. This consolidation will likely continue.
The other approach is where the companies expand their businesses into other cryptocurrencies and services. Marathon Digital has started mining Kaspa while others have moved to artificial intelligence (AI).
Riot Platforms earnings
One of the biggest RIOT news this week was its financial results, which came out on Wednesday. The company said that its revenue came in at $70 million, down from $76.7 million in the same period in 2023.
This performance happened because of a deep dive in its engineering revenue and offset by its Bitcoin mining numbers.
Riot’s cost of mining Bitcoin jumped exponentially from $5,734 in Q2’23 to over $25,327 because of the halving event. Halving has led to a big increase in Bitcoin mining difficulty.
Riot expects to continue growing its hashrate in the coming years. It ended the quarter with a rate of 22 EH/s, a figure it expects will rise to 100 EH’s by 2027.
H.C Wainwrite is bullish on Riot
In a note after its earnings, analysts at H.C Wainwrite noted that they were extremely bullish on the Riot Platforms stock despite the recent sell-off. Their estimate is that the stock will rise to $17, implying a 70% increase from the current level. They wrote:
“Riot now has a pipeline in place to achieve over 2 GW of total power capacity over the near term and good line of sight to achieve its 2024 and 2025 growth objectives, which are fully funded, as Riot has over $1B of liquidity on the balance sheet vs. $694M of total estimated capex requirements through 2025.”
Still, the risk to this thesis is that Bitcoin may have peaked now that it has failed to move above the key resistance point at $70,000. Another crypto winter will lead to more Riot Platforms stock retreat.
Riot Platforms stock price analysis
Turning to the daily chart, we see that the RIOT share price has been in a strong downtrend in the past few days. This sell-off started when it rose to a high of $13, the upper side of the ascending channel in July.
The stock remains below the 50-day and 100-day moving averages, which is a bearish sign. Most importantly, it has formed a bearish flag chart pattern shown in black. In most cases, this pattern results into a strong bearish breakout.
Therefore, the stock could continue falling, especially if it drops below the lower side of the flag pattern.
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