Few assets in 2020 have outpaced the gains of bitcoin but the shares of one company have been deftly riding the coattails of the epic resurgence in the No. 1 digital currency, and the rally in ethereum.
Riot Blockchain Inc.
RIOT,
once a biotechnology company back in 2017 and now a digital currency miner, has gained nearly 1,500% thus far on the year. Meaning that $1,000 invested in the company at its Dec. 31, 2019 closing price at $1.12 would now be valued currently at over $15,000.
By comparison, bitcoin prices, which were at $28,082, at last check on CoinDesk Wednesday midday, have risen over 290% thus far in 2020.
The Dow Jones Industrial Average
DJIA,
has gained almost 7% over the same time frame, while the S&P 500 index
SPX,
has climbed nearly 16%, and the Nasdaq Composite Index
COMP,
has returned about 44% in the year to date.
The surge in bitcoin prices to records around $29,000 this year has helped to send the market valuation of Riot to an astounding level given the relatively recent pivot in its business strategy and its relative size.
FactSet data indicate that Riot Blockchain, based in Castle Rock, Colo., has six employees and has seen numerous changes at the top as the company quickly transitioned in 2017 from a company named BiOptix (and Venaxis back in 2000), to a major player in mining for bitcoins and Ethereum’s ether
ETHUSD,
coins.
Nonetheless, the company boasts an impressive value of $1.141 billion, from around $27 million around this time last year (see attached chart of its market value).
FactSet
Riot’s rebranding three years ago was received with a lot of skepticism, as the company’s shift came amid a wave of similar moves by corporations which altered troubled business strategies to focus on popular digital currencies and their underlying technologies.
Back in 2018, a major shareholder, Barry Honig, who helped spur Riot’s transformation sold a significant portion of his shares after the company surged, raising some eyebrows on Wall Street. John O’Rourke, then a new chief executive at the company, also sold shares, the Journal reported.
Riot has dived head first into cryptocurrencies and specifically bitcoin mining. Mining refers to the use of high-powered computers to generate new units of the cryptocurrency, by solving complex problems that have become harder over the years by virtue of how bitcoins were originally encoded.
Bitcoin “mining” expends a tremendous amount of electricity and now requires specialized hardware. Miners play a key role in maintaining bitcoin’s self-sustaining network, running the decentralized software that verifies transactions.
Higher prices for coins can justify the high cost of mining for new coins, however. Currently the daily profit from one bitcoin miner is $7.81, according to mining-calculator site BTC.com, supporting by recent gains in prices.
Riot about a week ago said it would spend $35 million to purchase more mining capacity, known as Bitmain Antminers, bringing its equipment to around 37,000 miners.
A call to Riot’s CEO Jeffrey G. McGonegal wasn’t immediately returned.
And it hasn’t been just Riot that has enjoyed a renaissance induced by bitcoin. MicroStrategy Inc.
MSTR,
announced that it is deploying massive sums, over $1 billion, into bitcoin and encouraging other companies to exchange dollars for the digital asset. Shares of MicroStrategy are up 173% in the year to date.
Another digital-asset miner, meanwhile, Marathon Patent Group
MARA,
is up 1,300%, as it attempts to grow its mining enterprise. Overstock.com OSTK , an online retailer that has a heavy focus on digital currencies, is up 680% so far this year.
To be sure, these companies are a risky investment, experts warn, particularly if the price of the virtual asset falls, but the surge in shares of these companies reflect the newfound fervor around bitcoins and its ilk.
One key reason that such stocks are on the rise is because there aren’t many pureplay ways for investors to gain exposure to bitcoin in the stock market, with no exchange-traded fund in existence that would provide an easy entry point for average investors.