< Previous Next >
Riot Blockchain: How This Bitcoin Company Might Strike It Rich
DISCLAIMER: None of the following is intended to be investment advice. This is only meant to be a description of what has worked well for me so far, and my own opinions. Also, full disclosure, my links to Coinbase and Binance, etc., include referrals. It actually benefits you to use them because we will both get an extra $10 worth of BTC for free if you deposit at least $100 to Coinbase. Thanks in advance if you follow the links when you make your accounts — and even if you don’t, I hope this guide helps you out!
In 1848 there was the California Gold Rush. Nearly three hundred thousand would-be prospectors made their way west in the hopes of making new lives for themselves and finding prosperity. This sort of behavior has repeated itself many times both before and after that event; human beings are always looking for a way to become wealthy, and a sort of feverish mania tends to surround any “new” prospect.
One could easily argue that this mania is exactly what led to Bitcoin’s meteoric rise and fall over the course of late 2017 and early 2018. Instead of being interested in the technology, people were more interested in getting rich quick; naturally, as with any commodity where the price goes vertical, this couldn’t last forever. Of course, this says nothing about the long term prospects of Bitcoin — only that it’s undeniable at this point that there was a sort of “Bitcoin mania” going on.
At the same time, companies — like the gold-seeking “forty-niners” before them — started to latch onto this same mania. Companies began to try to incorporate blockchain technology into everything. Some companies went an even lazier route:
If your iced tea company is throwing “blockchain” in the name, it’s a pretty clear sign that you’re probably in this for a quick cash grab even if you claim to want to focus on ”the exploration of and investment in opportunities that leverage the benefits of blockchain technology.” Likewise, as I’ve previously written, there are plenty of other “blockchain” companies, like Longfin which might seem to be legitimate at first glance but are really the most abject sort of dumpster fires you could imagine.
If the companies are usually sketchy, why not just buy crypto?
This is a legitimate question, and it’s one that I’ve put a lot of thought into. If you believe that cryptocurrency will change the world, doesn’t it make more sense to just buy some Bitcoin and some altcoins? Well, there are actually many reasons I can think of for someone to go in on one of these companies in lieu of actual crypto trading:
- Technical complications. Let’s face it: understanding how to use cryptocurrency still has a learning curve, and many people would rather not spend time learning this new skill. If you’ve already got a brokerage account, you can easily purchase a blockchain ETF like BLOK, BLCN, LEGR, or KOIN and get a relatively accurate Bitcoin trading experience.
- Different risk profile. While an ETF (“exchange-traded fund”) is usually meant to correlate to a particular commodity such as gold or Bitcoin, it will never be 1:1 and it could even be way off. Furthermore, if you invest into a particular blockchain company, you’re dealing with an entirely different animal. While the market capitalization of cryptocurrencies is the wind that pushes their sails, an individual company could succeed or fail on other merits as well.
- Options trading, margin trading, etc. While Bitmex provides the ability to do all sorts of wacky things — even 100x leverage, if you’re completely out of your mind — it’s not open to many countries including the USA. This isn’t a problem if you’re trading an ETF associated with Bitcoin or a company which is focused on blockchain technology. You could buy calls on Riot today if you wanted to!
- Peace of mind. This one is a bit subjective. Personally, I am a strong believer in Bitcoin’s security — the only way you can lose your coins is if you make a mistake. However, it’s undeniable that there’s a lot more public faith in existing institutions. For better or for worse, people are more trusting of the stock market than cryptographic security. Of course, based on my experience with Longfin, I’m inclined to believe the opposite! Anyone who lived through the financial crisis of 2008 is well aware that the SEC, Nasdaq, the rating agencies, and basically the entire industry is chock-full of crooks.
Of course, for every reason I’m listing that you might want to buy a blockchain-based stock, there are just as many good reasons to buy cryptocurrency itself. As cut and dry as it might seem at first glance, the reality is that there are legitimate reasons to get involved with both types of trading.
RIOT Blockchain: Best Of Breed?
The “best of breed” is a term that originates in dog shows; to put it simply, it’s the winner. It’s also a phrase that this guy likes to use to describe stocks:
So, is Riot Blockchain the “best of breed” when it comes to Bitcoin-related stocks? I don’t know, but I do think that they are very promising in spite of the fact that they jumped on board the blockchain hype train in what appeared — at first! — to be a cash grab.
Riot Blockchain used to be a penny stock and a biotech company called Bioptix Inc. When they changed their name and focus, their share price skyrocketed, eventually reaching almost $30 per share. This is, as I’ve mentioned, a pretty obvious sign of price mania, and at the time it was fairly obvious that it wouldn’t last. Indeed, like with most cryptocurrency-related things, the price is quite depressed (around $6.5 at the time of this writing) compared to then. However, there is a difference between a company like Riot and an iced tea company that adds the word blockchain to its name. What is that difference? It’s simple: unlike many companies, Riot appears to be very serious about its pivot into blockchain technology.
In their own words, Riot Blockchain “is focused on building, supporting and operating Blockchain technologies. We aim to be part of the disruptive blockchain technology ecosystem that is revolutionizing transactions.” Here are a few of the tangible blockchain-related things they are doing:
- Mining operations. Riot Blockchain is very serious about mining, to the extent that they currently have about eight thousand ASIC miners. While they’re still in the process of fully deploying all of this, they will eventually achieve 110 petahashes per second. This is an incredible amount of hashing power! Back in May they reported mining 122 bitcoins, including the Bitcoin Cash which they converted into bitcoins. That’s around a million dollars going by May prices — not bad!
- Blockchain-related investments. Riot is serious about investing in or acquiring various cutting-edge blockchain companies and projects. Some examples of these projects are Coinsquare (a Canadian Bitcoin exchange), Tesspay (a blockchain-based escrow service for telecom carriers), and Verady (a “blockchain asset assurance” service which is providing badly-needed accounting and audit technology). These sorts of investment mean that Riot’s profitability is not as married to the price of Bitcoin as one might think; they’re not just mining. If even one of these projects takes off, we are likely to see quite a jump in Riot’s share price.
What about the SEC investigation?
As I wrote in my article about LFIN, getting investigated by the SEC isn’t exactly a good thing. Like many other blockchain-pivoting companies, Riot was recently given a subpoena; naturally, this provided great sport for bears who declared that the company would soon be trading on pink sheets. To quote a report from the company:
“The Company has received and responded to comments from the staff of the SEC regarding certain developments and the Company’s ongoing development of a blockchain/cryptocurrency business model. These inquires include the proper asset classification, applicability of the Investment Company Act [of] 1940, to the Company’s business and affairs and accounting treatment of its cryptocurrency,” according to the quarterly report.
Likewise, the company received a delisting warning from the Nasdaq for failing to hold its annual shareholder meeting. A little more than a week ago, however, this problem was solved. To quote Riot Blockchain’s press release:
In a letter dated June 20, 2018, Nasdaq informed the Company that, as a result of its shareholder meeting on June 15, 2018, the Company now complies with Listing Rule 5620 and the matter is closed.
Just yesterday, more news arrived which adds heavily to Riot’s legitimacy: the company is now joining the Russell Microcap Index. An “index” is something which measures the performance of various segments of equity markets and are essentially made up of many stocks which share certain attributes. In this case, the common denominator is that all of the stocks in this particular index are “microcap” stocks, i.e., they have small market capitalizations.
This is a mouthful, but the long story short is this: getting onto the FTSE Russell indexes usually doesn’t happen to sketchy stocks, and if it does, they get thrown off very quickly just as Longfin did. The fact that Riot was indexed is very good news; I believe this vindicates them as far as the SEC investigation fears go and implies smooth sailing for the near future — or, at least, as smooth of sailing as is possible when you’re in the rough waters of the cryptocurrency world.
So, what’s the takeaway?
Full disclosure: I am invested in Riot Blockchain. I’m not unbiased; I believe it’s likely that this company is eventually going to be quite profitable, and I’ve put money on this prediction. However, I’m not some kind of magical augur; I don’t know when this will happen, and I can’t be sure that a freak tornado (or some similar unforeseen disaster) won’t wipe out all their data centers tomorrow. It’s indelible that their stock price is fairly married to the price of Bitcoin, and anyone who’s been in the crypto world for more than five minutes knows that the only reliable price predictions tend to run along the lines of “it might go up, it might go down.”
Still, I strongly believe that Riot Blockchain is a promising crypto stock — perhaps the most promising one out there. The takeaway is this: do your research and make your own decision, but I strongly believe that Riot is a good investment for those interested in investing in crypto without going through the trouble of buying the actual currency.
Before you go…
Know of any other hot-button issues with cryptocurrencies? Want me to write about them? Let me know! I love to hear feedback from people and get ideas on what cryptocurrency topics I should research. You never know, I might even write an article about your suggestion!
If you’re new to cryptocurrencies, don’t worry — it’s easy to get in on this! Here are the basic steps if you’re interested in Bitcoin or altcoins:
- Buy some Bitcoin or Ethereum from Coinbase.
- Trade them for altcoins on Binance, KuCoin, HitBTC, or Changelly. Out of these, Binance is my preferred exchange. It has recently become possible to buy bitcoins on Binance directly, as well!
- If feasible, store your coins offline in a wallet for security purposes. Use an inexpensive Android phone with the Coinomi wallet app, or go ultra secure with a hardware wallet like the Ledger Nano S or Trezor.
If you’re looking for a more lengthy guide to purchasing coins from start to finish, just take a look at my page — I’ve written a lot about this! Any of my instructional altcoin articles (such as this one) will first explain in detail how to get Bitcoin if that’s all you want.
Come back soon because more content like this is always coming! If my work helped you or gave you something to think about, share it with others:
Sharing helps more people find my articles, and I’d love to be able to assist as many people as possible with cryptocurrencies. Also, if you have any ideas for future articles or specific questions, I’d love to hear them. One last thing: if you’d like to chat with me in real time, check out my Discord!
< Previous Next >