What happened

It's still earnings season, with a number of high-profile companies yet to report. For those intrigued by the recent cryptocurrency rally, Riot Blockchain (RIOT -5.86%) is one company investors may have been watching closely heading into its second-quarter results, which were released after market close yesterday.

Today, Riot's stock opened slightly lower and has lost steam throughout the day, trading down 5.5% as of 11:30 a.m. ET. 

The results certainly weren't what investors and analysts expected. Riot missed top-line estimates, with revenue coming in at $72.9 million. This figure missed estimates by more than 5%. Worse still, a massive loss of $0.50 per share far exceeded expectations of a $0.15 earnings-per-share loss. This higher-than-expected figure appears to be primarily attributable to a large noncash Bitcoin impairment charge. 

On a positive note, Riot did report mining revenue of $46.2 million, a 46.6% increase year over year. However, lower Bitcoin values during the quarter did impact the company's growth rate, as Riot's Bitcoin production more than doubled from 675 BTC a year ago to 1,395 during the second quarter of this year. 

By the first quarter of next year, Riot expects its self-mining capacity to increase further, from a rate of 4.4 exahash per second (EH/s) to a rate of 12.5 EH/s when the full number of antminers the company has ordered are deployed.

So what

These results are rather interesting to dive into, partly because expectations appeared to be so low heading into them. Most investors and analysts know that Bitcoin values have dropped significantly on a year-over-year basis. Of course, these lower Bitcoin values have been expected to bleed through to rather dismal results.

That said, the extent of the impairment charge the company took hasn't seemed to have been factored in by the market. Additionally, it appears analysts had priced in a higher EH/s rate from Riot than what was actually produced this quarter. Accordingly, forward-looking concerns appear to remain high, as uncertainty around Bitcoin prices remains elevated.

That said, given the company's expectations that it will nearly triple its mining capacity by the first quarter of next year, even at lower Bitcoin prices, profitability may be possible. Thus, Riot stock appears to really be a leveraged bet on where Bitcoin prices are headed from here. 

Now what

There are many investors who may be turned off by Riot's results, given the fact the company produced a rather significant loss despite more than doubling its production. In many ways, this earnings report highlights the reality that scale doesn't really help miners in a lower-price environment. Indeed, producing more of something that carries a negative margin isn't good for business. 

While Bitcoin appears to be trading above Riot's breakeven currently, and this noncash impairment is now out of the way, perhaps next quarter will be better. At least, that's what the market was signaling could be possible this morning. 

That said, today's loss of momentum in the stock appears to support the view that more downside could be possible, should market fundamentals deteriorate again for Bitcoin. Crypto is a risky business, and investors appear to still be taking a cautious view. Until that changes, Riot Blockchain stock is likely to remain volatile from here.