If your circumstances make it impractical to buy Bitcoin directly (for instance, if you're investing in a retirement account), or you don't want to be bothered with a cryptocurrency trading account, there's another avenue to consider. Shares of Riot Platforms (RIOT 1.94%) provide direct exposure to the ebb and flow of crypto, and especially Bitcoin.
Like Bitcoin itself, Riot Platforms stock is prone to bouts of volatility, so it's not appropriate for every investor's portfolio. Yet, after an impressive year-to-date rally, crypto fans might wonder whether it's a good time to purchase a few Riot shares. As usual, the answer is, "It's complicated" -- but if you happen to fit the profile as a prospective Riot Platforms investor, you might have stumbled upon a worthy crypto-centric holding for the rest of 2023.
Riot Platforms mines, but the stock doesn't shine
It's no understatement to say that Riot Platforms has been on a Bitcoin mining spree lately. In April, for example, Riot deployed 94,176 miners to produce 639 Bitcoins, a year-on-year increase of about 26%. In this year's first quarter, Riot Platforms produced 2,115 Bitcoins, which is around 50% more than the 1,405 Bitcoins Riot produced in the year-earlier quarter.
It appears that Riot Platforms' blistering mining pace may have helped the company achieve a couple of positive earnings surprises. Specifically, the company's adjusted earnings per share of $0.04 surpassed the analyst consensus forecast of an adjusted, EPS loss of $0.15.
There's nothing manifestly objectionable about these results, yet Riot Platforms stock plunged 13% after the company released its quarterly earnings report. Riot's loyal investors might wonder why this happened, but being a successful Riot Platforms shareholder could mean holding your nose and buying despite the stock's short-term price action, and learning to accept the outsize influence of external events on blockchain stocks.
When "not my problem" becomes your problem
The stock market, while highly efficient, isn't always fair. One could have a very reasonable bullish thesis on a company like Riot Platforms, yet lose money for weeks or months due to unforeseeable circumstances that aren't the company's fault.
The sooner you accept this, the less frustrated you'll be if you choose to invest in Riot Platforms. The stock's steep post-earnings drop may have been more of an expression of the market's anxiety over Bitcoin's volatility than a response to anything that Riot did or didn't achieve in 2023's first three months.
That's just one example of how external events can push Riot Platforms' share price in one direction or the other. In another recent instance, Riot stock popped on, of all things, a consumer price index (CPI) report that was slightly better than anticipated; evidently, this put traders in the mood to buy risk-on assets. Another time, Riot Platforms stock fell because cryptocurrency trading platform Binance briefly paused Bitcoin withdrawals amid network congestion issues.
In short, don't expect the immediate price moves of Riot Platforms stock to be company-driven, or even necessarily Bitcoin-driven. If you can handle the uncertainty and randomness in the short term, then you have an opportunity to own a stake in a top Bitcoin miner. Just be prepared to have your holdings tethered to the ups and downs of Bitcoin -- and on some days, untethered from any semblance of rhyme or reason.
