Is Riot Blockchain a No-Brainer Buy After the Bitcoin Halving?

Bitcoin (CRYPTO:BTC) halving event took place in April as expected. Bitcoin miners now receive half the reward for the same amount of work. Are mining experts like Riot Platforms (NASDAQ: RIOT) currently facing insurmountable economic challenges, or are they poised to soar under the influence of the rising Bitcoin price? Or does the truth lie somewhere in between?

Let’s take a closer look at Riot Platforms to see what’s going on.

How did Riot adapt to the 2020 halving?

This isn’t Riot’s first halving rodeo. The company had been pursuing veterinary drug patents but acquired a small Bitcoin miner in 2017 and turned its focus to blockchain operations the next year. Two years later, on May 11, 2020, the third Bitcoin halving took place.

It was a different time for Riot. Alongside the global impact of the then-current coronavirus pandemic, the company was building out its Bitcoin mining infrastructure. Crypto mining generated $2.4 million in revenue in the first quarter of 2020, and $23.2 million a year later. Riot’s properties and equipment (largely including crypto mining hardware and facilities) have tripled in value over the same period. And the first quarter cost of electric power increased more than fivefold, from $1.4 million to $7.5 million.

At the time, Riot was burning tons of cash by keeping the lights on thanks to dilutive stock sales and small Bitcoin sales. Thanks to the halving of Bitcoin miner rewards, Riot’s Bitcoin production fell 28% year-on-year in the first quarter after the 2020 halving.

Bitcoin prices began to rise during this period, increasing by a modest 10% from September 1, 2019 to September 1, 2020. But then a few halving effects began with a vengeance.

Survival of the fittest in Bitcoin mining

Halving events put huge pressure on inefficient crypto miners. Many people and companies that produce Bitcoin data blocks with low-power hardware or high electricity costs are forced to go bankrupt every four-year halving cycle. When these failed mining experts move out, the remaining high-yield miners will have a larger percentage of the total rewards.

“When high-cost producers go down, [mining] Riot CEO Jason Les explained in a recent earnings call: “To achieve that long term and become a leading Bitcoin mining company, the challenges are improving, which is expanding the margin again as we mine more Bitcoin.” “This ensures low energy costs and maintains low production costs in more challenging spots in the market.”

The story continues

Riot’s strategy for the 2020 halving

The halving in April 2020 represents another “hard point” in the Bitcoin mining market. If history is any guide, low-cost miners like Riot should thrive as lower-end competitors decline, and as this dynamic continues, the price of Bitcoin should begin to rise as well. Here’s how Riot’s business results fared in the 2020 halving cycle:

RIOT Revenue (TTM) Statement

Past results are no guarantee of future success and each halving cycle is different. Still, the economic themes around the driver of this crypto market tend to adapt and resonate throughout the ages. On the contrary, Riot is in a stronger position entering this particular cycle, armed with a rich balance sheet and more significant mining operations. The company even sells energy to the Texas power grid as heat waves strain the local power grid.

Riot is a no-brainer, but maybe it could be an acquisition

So is Riot something to buy without thinking?

Not necessarily, but if this halving cycle works out like the last one, the stock could post solid gains. Riot’s position in the market, strengthened by its low-cost operations and expanding infrastructure, provides a strong case for potential upside.

But you should examine your risk tolerance, recognize the high-risk, high-reward nature of Riot, and make your moves accordingly. This investment is not for the faint of heart, but it could be a strategic addition for those who are positive about Bitcoin’s long-term prospects.

Should you invest $1,000 in Riot Platforms right now?

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Anders Bylund has positions in Bitcoin. The Motley Fool has positions in Bitcoin and recommends it. The Motley Fool has a disclosure policy.

Riot Blockchain, Can You Buy Impulsively After Bitcoin Halving? originally published by The Motley Fool