What happened

Shares of Riot Blockchain (RIOT -2.29%) 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 -3.43%), 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.