- Riot Platforms share price has jumped sharply in the past few weeks.
- This rally is mostly because of the strong Bitcoin comeback.
- Investors should avoid RIOT and MARA and invest in Bitcoin itself.
Riot Platforms stock price has surged as investors cheer the recent crypto price rally. The shares jumped to a high of $15, the highest it has been since April last year. It has soared by more than 200% this year, making it one of the best-performing stocks in the US. Other Bitcoin mining stocks like Marathon Digital and Algo Blockchain have also jumped.
Why RIOT is soaring
Riot Blockchain is one of the biggest Bitcoin mining companies in the world. The company runs large mining operations in the United States. In 2022, the company’s revenue jumped to over $259 million from the previous n$213 million. This is important because it happened when Bitcoin plunged to a multi-year low of $15,300.
While Riot Platform’s revenue jumped, its losses also soared as well. The company’s net loss rose from $15.4 million in 2021 to over $509 million in 2022. This happened as the company’s cost of business coupled with depreciation increased.
Riot Platforms stock price has jumped this year as investors remained optimistic about the crypto industry. The view is that Bitcoin price could surge to over $67,000 this year when the Fed stops hiking interest rates.
There are hopes that the Fed will stop hiking in May this year. Minutes published on Wednesday showed that some officials favored pausing in March. And with inflation moving in the right direction, there is a likelihood that the bank will pivot soon.
Why you should avoid Riot Blockchain stock
Riot Blockchain stock price tends to do well when Bitcoin price is rising. The same happens in other mining industries. For example, gold mining stocks tend to rise when gold price is rising. The same is true for silver and copper.
Read more: Best Bitcoin Exchanges.
However, I believe that investors should buy Bitcoin or the ProShares Bitcoin Strategy ETF (BITO) instead. BITO is an ETF that tracks the price of Bitcoin.
First, historically, mining stocks tend to underperform the commodity that they mine. For example, gold price has jumped by more than 200% from 2008. In the same period, the VanEck Gold ETF has dropped by over 25% as shown below.
The same is true with Bitcoin and Riot Platforms. In the past five years, BTC price has jumped by 250% while Riot Blockchain stock has risen by about 100%.
Second, Bitcoin is immune from some of the challenges that Riot Platforms faces. For example, it is not required to make quarterly disclosures. In the past, we often see companies falling sharply when their results missed estimates.
Finally, Bitcoin is a neutral asset that is not affected by external factors like rising power costs and regulations.
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