Please ensure Javascript is enabled for purposes of website accessibility

Why Riot Blockchain Stock Is Surging Today

By Jordan Wathen – Dec 26, 2017 at 1:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Bitcoin stocks are rising thanks to a jump in the price of bitcoin.

What happened

Shares of Riot Blockchain (RIOT 0.23%) are up about 20% as of noon EST as investors flock into bitcoin-related stocks to profit from the cryptocurrency's rising price. Notably, Bitcoin Investment Trust (GBTC -2.17%), a quasi-ETF for bitcoin that holds approximately 0.092 bitcoin per share, is joining Riot Blockchain in a broad bitcoin rally, rising about 23% so far on Tuesday.

So what

After striking a high near $20,000 on Dec. 17, bitcoin briefly dropped to as low as $10,400 on Dec. 22. Bitcoin is rebounding sharply today, rising above $16,100 on GDAX, a popular bitcoin exchange. 

Artist's rendering of what a physical bitcoin token might look like.

Image source: Getty Images.

Beyond high-priced bitcoin futures, investors have few ways to speculate on the price of bitcoin with an ordinary brokerage account. Thus, stocks with any ties to bitcoin at all, even if in name only, tend to become vehicles for speculating on bitcoin's ups and downs.

At current market prices, shares of the kind-of bitcoin ETF Bitcoin Investment Trust trade at a price roughly 65% higher than the underlying value of its bitcoin. That's significantly higher than the median premium of roughly 42%. I use the trust's premium relative to its historic levels as a barometer for speculative demand for bitcoin assets. 

Now what

Riot Blockchain's ties to bitcoin are purely tangential in nature. The struggling biotech company turned bitcoin investor owns 1,200 cryptocurrency mining rigs and equity stakes in Coinsquare and Verady, a cryptocurrency exchange and audit and accounting service provider, respectively. Its investments in opaque, private companies make it difficult for outsiders to value Riot Blockchain's holdings. 

The company recently announced that it raised $37 million by issuing approximately 1.65 million units entitling investors to one share, plus warrants to acquire an additional share at a price of $40. The equity raise gave the company more cash to seek out other investments in companies that make money selling the "picks and shovels" to others who are just getting in on the bitcoin gold rush, but only time will tell if its investments pan out for its shareholders.

Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Grayscale Bitcoin Trust Stock Quote
Grayscale Bitcoin Trust
GBTC
$9.03 (-2.17%) $0.20
Riot Blockchain, Inc Stock Quote
Riot Blockchain, Inc
RIOT
$4.43 (0.23%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.