Riot Blockchain Stock Price and Forecast: Bitcoin bounce is beautiful, but breakout still awaited

Update October 14: Riot Blockchain Inc (NASDAQ: RIOT) is benefiting from the recent rise in Bitcoin. The granddaddy of cryptocurrencies is trading at around $57,500, and other digital assets like Ethereum, Ada and XRP are also on the move. However, Thursday's gains are limited to around 1% – uninspiring in comparison to the moves in cryptos. Moreover, RIOT is still down in the past month. A breakout is still pending, as explained below. 

RIOT Blockchain stock rose a pretty modest 0.51% on Wednesday. We say a pretty modest increase, because some other names in the crypto sphere rose sharply, following recent strong gains in the price of Bitcoin and other cryptocurrencies. Bitcoin has nearly gotten back to $60,000 and Marathon Digital (MARA) stock rallied over 7% on Wednesday. Bitcoin has been strong since Federal Reserve Chairman Jerome Powell said there were no plans to ban the cryptocurrency leader, and Bitcoin duly took the news and pushed sharply higher. It has remained elevated since with some pullbacks. While many crypto names have rallied or at least shown some volatility, RIOT looks strangely subdued. Is it setting up for a big breakout? Or is this a failure and a bearish signal? 

RIOT key statistics

Market Cap	$2.5 billion
Enterprise Value	$3.15 billion
Price/Earnings (P/E)	77
Price/Book	7.5
Price/Sales	89
Gross Margin	46%
Net Margin	45%
EBITDA	$28 million
52 week high	$ 79.5
52 week low	$3.0757
Short Interest	18%
Average Wall Street rating and price target	Buy $54

RIOT Stock news

On Tuesday of last week, October 5, RIOT released September production numbers. The number was strong with a yearly increase in production of 346%. In September 2021 RIOT Blockchain produced 406 BTC compared to 91 BTC in the same month a year earlier. As of September 30, 2021, RIOT said it holds approximately 3,534 BTC, all of which are from its own mining operations. The company currently has 25,646 miners with a hash rate capacity of 2.6 exahash per second. RIOT aims to increase this to 7.7 exahash per second by Q4 2022. 3,534 Bitcoins at current prices is worth $203 million approximately. 

One aspect that is often overlooked in relation to Bitcoin miners is the price of energy it is costing to pursue all this mining activity. Energy costs are soaring globally, and this should have a knock-on effect on the costs of mining operations. Some miners have their own generation capacity from renewable sources, it should be noted, but it is a consideration overall for the Bitcoin mining industry.

RIOT from its own website says, "Our self-mining operations are currently based out of Coinmint LLC’s facility in Massena, New York where we have deployed a fleet of 16,146 next-generation Bitcoin mining ASICs. Coinmint’s facility is located in Zone D of the NYISO with very low cost of power, driven by an abundance of renewable energy generation sources. Coinmint draws its energy from 88% zero-emission sources."

In May of this year, Riot announced the acquisition of Whinstone US, a site where it pays the incredidibly low cost of 2.5 cents per kWh. 

RIOT stock forecast

We had put RIOT on watch and got a 7% pop on Monday, but we did not get the follow-through we wanted. Rather the stock gave up all those gains and more. This is a bearish sign in our view, not holding onto gains. Our call at the time after the pop: "A pullback after such a strong move is fine so long as RIOT stock remains above $26.50." RIOT broke below on Wednesday, so where now?

Clearly, Bitcoin remains elevated, so that should put some floor under crypto stock prices in the short term. Wednesday saw some strong pops from some in the sector (MSTR and MARA), but others were quiet by comparison such as RIOT. There is still potential for a breakout with the stock trading sideways since mid-September. Look for a strong move breaking the 9 and 21-day moving averages and confirmation from the Relative Strength Index (RSI) breaking the trend line.

FXStreet View: Neutral