What happened

Shares of cryptocurrency miner Riot Blockchain (RIOT 4.01%) were seeing volatility on Tuesday morning. The stock was up 7% as of 10:30 a.m. EDT. It's trading higher because Bitcoin (BTC 0.83%) hit an all-time high today. But Riot Blockchain is having a hard time staying up, perhaps because of something said by a former short-seller. 

So what

Right before 8 a.m. EDT, the price of Bitcoin surpassed $63,000 for the first time, according to CoinDesk. For perspective, it was at about $6,800 at this time last year. Riot Blockchain is mining almost 200 Bitcoins per month according to an update for investors yesterday. Furthermore, the company's holding 1,565 Bitcoins currently -- worth almost $100 million and rising as the price of Bitcoin goes up. This is why the stock is up today.

A businessman draws an exponential growth curve on a line graph.

Image source: Getty Images.

However, Riot Blockchain has a market capitalization of $4.6 billion and some investors think that's too much. Citron Research has decided to not publish short reports anymore, but it rose to prominence thanks to its past short positions. Today, Citron took to social media to say that Riot Blockchain stock should trade in line with its net asset value (NAV), which it estimates at $2 per share. The stock pulled back from highs in the minutes following the post from Citron.  

Now what

On one hand, Citron Research makes a fair point. Consider that Riot Blockchain held 1,078 Bitcoins on Dec. 31, 2020. It mined 491 Bitcoins in the first quarter and currently holds 1,565, implying it only sold four Bitcoins in Q1. This means the company is largely funding operations through financing and primarily mining Bitcoin in order to hold. Therefore it's reasonable to value the company based on its assets. 

On the other hand, Citron compared Riot Blockchain's valuation to that of Bitcoin funds like Grayscale Bitcoin Trust. That seems like an apples-to-oranges comparison to me. Riot Blockchain is increasing its mining capabilities throughout 2021 and beyond. Therefore, assuming the price of Bitcoin stays the same, the company's net asset value is poised to increase from here. For this reason, it doesn't seem fair to value the company based on a static NAV like you would something like Grayscale Bitcoin Trust.

In summary, what Riot Blockchain is worth is up for debate, as today proves. But it's probably more than the $2 per share implied by Citron Research.