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Riot Blockchain, Canaan, and The9 Stock All Soared Today as Bitcoin Becomes $1 Trillion Asset

By Jon Quast - Feb 19, 2021 at 1:33PM

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Demand for the popular cryptocurrency is only getting stronger the higher the price climbs.

What happened

Bitcoin (BTC -3.43%) reached an unprecedented milestone for a cryptocurrency on Friday morning. The price of Bitcoin tokens surpassed $53,700 each, carrying Bitcoin's market capitalization over $1 trillion. And stocks that are related to Bitcoin like Riot Blockchain (RIOT -4.07%), Canaan (CAN -8.28%), and The9 Limited (NCTY -3.85%) are all soaring today as a result, up 21%, 33%, and 23%, respectively, as of noon EST.

According to Coinbase, Bitcoin is up around 5% over the past 24 hours, hitting all-time highs above $54,300. But there are other cryptocurrencies making much bigger moves today. One is Binance Coin (BNB -0.82%), up roughly 49% as of this writing. And this outsize move is probably telling us something.

A businessman rides a rocket ship that's expelling cash exhaust over a multicolored bar chart

Image source: Getty Images.

So what

For the record, Riot Blockchain, Canaan, and The9 didn't report news that warranted moving their stock prices this much. Canaan and The9 didn't report anything at all. Riot Blockchain filed with the Securities and Exchange Commission (SEC), showing insider Hannah Cho acquired 12,500 shares. On the surface it seems bullish. However, Cho was recently added to the board of directors, and these shares came free with the deal.

Therefore, the real news today is what's going on with Bitcoin. So far in 2021, we've seen growing adoption from Wall Street. One recent adopter was Tesla, which added $1.5 billion in Bitcoin tokens to the balance sheet. CEO Elon Musk took to social media today to explain the move, essentially saying it was a way to hedge against inflation.

In time, there's a chance more companies will see this issue as Tesla has, creating more demand for Bitcoin as they buy tokens (by the way, even private companies are buying Bitcoin, including The Motley Fool). But not all corporations add a small Bitcoin position as a hedge. Some, like MicroStrategy (MSTR -3.81%), appear to be going all in. 

MicroStrategy just issued over $1 billion in convertible notes to buy more Bitcoin. On one hand, it's going to buy less than Tesla bought. But Tesla is a $760 billion company. By contrast, the market cap of MicroStrategy is under $10 billion. Moreover, the company already owns over 71,000 Bitcoin tokens worth around $3.8 billion. Therefore, whatever happens to the price of Bitcoin going forward is going to directly impact MicroStrategy stock one way or the other.

Stacks of physical, golden coins all display the Bitcoin symbol.

Image source: Getty Images.

Now what

While it's just one company, MicroStrategy's $1 billion demand for Bitcoin is enough to outpace the new supply of tokens in the short term. This can cause the price to keep rising. And as the price quickly rises, it can attract more buyers who are afraid of missing out. And that may be what's happening.

Let's come full circle back to Binance Coin. It's the native token of Binance -- one of the largest cryptocurrency exchanges in the world. Demand for this coin is increasing as more people start using Binance. Beyond that, it appears Binance's PancakeSwap is creating more demand for Binance Coin as well.

I'll try not to stray too far into the weeds. Blockchain networks facilitate decentralized finance (DeFi) -- no one is in charge, and there's not a physical headquarters. There are only computer protocols facilitating exchange. One popular decentralized exchange is Uniswap, which is built on the Ethereum blockchain.

However, some complain that the fees on the Ethereum blockchain are too high. PancakeSwap works like Uniswap, but is built on the cheaper Binance blockchain. Therefore, it appears new users are flooding Binance and switching to PancakeSwap in recent days, causing the price of Binance Coin to surge.

The point is, the rising price of Bitcoin is getting a lot of attention. More and more, people are looking to invest in cryptocurrency and cryptocurrency stocks. On one hand, I personally think there's some good investments in the space. However, investors should always be cautious when approaching a new investment -- fear of missing out (FOMO) should never be the foundation of your investing thesis. 

Furthermore, even when you've developed a good investing thesis, it's still important to maintain a diversified portfolio because it spreads out risk. And there's undoubtedly risk with cryptocurrencies.

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Stocks Mentioned

Bitcoin Stock Quote
$29,251.21 (-3.43%) $-1,037.67
MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
$202.75 (-3.81%) $-8.02
The9 Limited Stock Quote
The9 Limited
$1.50 (-3.85%) $0.06
Riot Blockchain, Inc. Stock Quote
Riot Blockchain, Inc.
$6.84 (-4.07%) $0.29
Canaan Inc. Stock Quote
Canaan Inc.
$3.10 (-8.28%) $0.28
Binance Coin Stock Quote
Binance Coin
$304.34 (-0.82%) $-2.51

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

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