FILE PHOTO: Broken representation of the Bitcoin virtual currency, placed on a monitor that displays stock graph and binary codes, are seen in this illustration picture, December 21, 2017. REUTERS/Dado Ruvic/Illustration/File Photo
Bitcoin's fading momentum.
Reuters

Riot Blockchain stock plummeted as much as 18.5% on Thursday as bitcoin’s momentum turned decidedly negative.

The cryptocurrency has dropped some 22% from its January 8 high of over $40,000 per coin. Three-day losses for Riot’s stock now exceed 30%.

Riot Blockchain is one the largest bitcoin mining operations, and until recently, business had been booming. The company saw a 42% increase in revenues year-over-year in the third quarter of 2020.

Riot also recently announced the receipt and deployment of 2,500 additional Bitmain S19 Pro Antminers, leaving the firm with a total of 9,540 Antminers in operation.

The company has an additional 28,100 S19 and S19j Pro Antminers on order through 2021 as well. When fully operational, Riot expects to boast an aggregate bitcoin mining hash rate capacity of 3.8 Exahash (“EH/s”), making it one of the largest crypto miners in the world.

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However, just like gold miners, bitcoin miners’ stocks are highly correlated to their underlying asset. That means any trouble in bitcoin hurts Riot’s bottom line.

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And lately, Bitcoin’s momentum has turned negative. There were a few key news stories that caused the coin’s price to fall.

First, Janet Yellen suggested ‘curtailing’ bitcoin on Tuesday, arguing the cryptocurrency is used in “mainly used for illicit financing.”

Second, an unconfirmed report from BitMEX research suggested a critical flaw called “double-spend” occurred in the bitcoin blockchain. If the reports are true, they could undermine confidence in the cryptocurrency.

There are still bulls out there, though. On Wednesday, it was revealed the world’s largest asset manager, BlackRock, will allow two of its mutual funds to invest in the cryptocurrency.

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Riot appears to be aware of just how important bitcoin’s price is to its own future.

“The price of bitcoin recently exceeding $41,000 has resulted in a dramatic rise in values attributed to bitcoin mining enterprises, while also accelerating competitive expansion in the industry and higher acquisition costs for increasingly scarce miners,” said Jeff McGonegal, CEO of Riot.

McGonegal continued, “as Riot evaluates its strategy for 2021 and beyond, we are very excited and focused on the significant opportunities created by current market conditions, but also mindful of the potential impacts on our business that the highly volatile bitcoin pricing trends can have on operations and values, combined with competitive, market and regulatory factors that need to be monitored and considered.”

Riot shares traded at around $18.40 per share on Thursday, giving the crypto miner a $1.25 billion market cap.

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