Today we are going to be looking at a market favorite for playing bitcoin, $RIOT. Riot Blockchain Inc is a cryptocurrency mining company that has for the past couple years been operating at a loss. Today we are going to be looking into how you can have massive returns by buying shares on $RIOT.
This thesis is broken down into two parts.
$RIOT’s value is heavily impacted by the current price of Bitcoin. This is because $RIOT holds on to a majority of the Bitcoin it mines instead of selling. This is the main reason that $RIOT has been operating at a loss. Further, The company has a massive amount of cash on hand from its selling of crypto in February of 2021.
Look at those assets to liability. This is from their most recent 10-k.
In addition to selling crypto and mining coins, $RIOT in late 2020 offered a class A share sale to the public to raise more capital. This exploded the cash on hand for $RIOT and has put them in a key position to invest in Bitcoin in the coming future.
$RIOT’s S-3 form submitted to the SEC on December 4th, 2020 outlining the sale.
$RIOT is cash liquid right now. While the company invests heavily in crypto mining hardware at the end of the day it is transitioning to a quasi-bitcoin investment firm. The amount of cash they hold on hand will allow them to reinvest into the crypto market at the bottom and drastically increase their asset value. Now that we know that $RIOT is basically just a giant Bitcoin wallet we can move onto the next part of the investment thesis.
Bitcoin’s price is expected to reach over 100k by 2025 and continue onwards. This is because of Bitcoins use as a hedge against inflation within investment portfolios; Gold is used for the same reason. Here is a link to a recent filing in April of 2021 that shows how the “smart-money” is looking at Bitcoin to add to their portfolios. (https://markets.businessinsider.com/currencies/news/brevan-howard-crypto-hedge-fund-set-to-invest-bitcoin-2021-4-1030312070)
$RIOT is going to average down on their Bitcoin holdings during the next bear market. They can do this because of the massive capital they gained from selling the class A shares along with the strategic selling of Crypto currency.
During the next bull market $RIOT will be able to double or triple their assets without upscaling their operation. As a result we could expect $RIOT to shoot up to above $70-$80 in a very short timeframe, should everything work out. Currently the market is failing to price in this action and as such we have a great opportunity to exploit this for our own gain.
Since the market is failing to price $RIOT’s business plan accurately we should look at slowly acquiring shares on $RIOT. Below is the 1 day chart for the company with key resistance levels outlined (slide the picture).
1 day chart on $RIOT, red circles outline resistance where getting shares is a good idea.
Currently the implied volatility on $RIOT is too much to comfortably take out a LEAP option. Acquiring shares will prevent you from getting Theta Decay. If LEAP options ever trend below 60% volatility then I would look at acquiring them (as of 06/22/2021 the IV on the LEAPS are 98%).
The IV on the LEAPS will drop if $RIOT, and the $BTC market trends sideways for a while like it did from 2018 to the end of 2020. If that happens then LEAPS will become reasonably priced.
Price and Risk:
Taking out shares in the low $20’s is good. This is because there is support for the company in the low $20’s. I would sell should $RIOT begin to trend closer to $15 or if the company fails to utilize their new capital in a smart way.
Should $RIOT trend up before you can get in then investing on a pullback in the low $30’s works. Investing here however opens you up to more risk on the investment as the floor is still in the low $20’s.
This investment will take anywhere between 2-4 years but you can expect to make close to 100% should $RIOT reinvest their excess capital into averaging down on Bitcoin. To figure this out we need to watch their SEC publications closely to see what is going on behind the scenes. But if played properly then you can expect to really set your portfolio up for some massive gains in 2025-2030.
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Until next time I wish you the best of luck in your investments!