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Riot Blockchain short interest: RIOT stock price struggling amid FTX fallout despite scale of largest US listed miner

By Alejandro Arrieche

Edited by Jekaterina Drozdovica

16:55, 19 December 2022

Riot Blockchain short interest
Riot Blockchain, a bitcoin mining stock, slumped in 2022 amid the falling value of bitcoin. – Photo: Getty Images

Riot Blockchain (RIOT) is caught on the short-sellers’ radar amid the declining value of Bitcoin (BTC) and other digital assets. The troubled cryptocurrency miner suffered a spike in short interest in November as its stock value plummeted to two-year lows. 

Riot Blockchain (RIOT) live stock price

What’s the latest on the stock value and could there be a short squeeze if the market rebounds? Here we take a look at the Riot Blockchain short interest. 

What is Riot Blockchain (RIOT)?

Riot Blockchain is a cryptocurrency mining company, which operated nearly 31,000 rigs, as of late 2021. The company’s main farm Whinstone Facility is located in Rockdale, Texas, US.  

Riot generates revenue from three business segments:

  • Bitcoin Mining: Riot uses advanced computers to validate transactions that need to be recorded on the Bitcoin blockchain and is rewarded in BTC tokens that are either put on reserve or sold to generate revenue for the business.
  • Data Center Hosting: with the acquisition of Whinstone US, Riot entered the data business. Whinstone provides critical infrastructure and necessary workforce for institutional-level bitcoin miners to operate adequately.
  • Electrical Products and Engineering: via the acquisition of ESS Metron, Riot offers access to top-notch components needed to develop high-end cooling systems.

 

Once known as Bioptix, the company renamed to Riot Blockchain in October 2017. Bioptix was a publicly-traded company since 2003. The stock is listed on the Nasdaq stock exchange under the ticker symbol ‘RIOT’. 

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Riot Blockchain short interest: Bets against crypto firms rise amid FTX debacle

Riot Blockchain stock price has fallen 83% in 2022 (as of 19 December). Cryptocurrency markets have been shaken by a shift in the macroeconomic backdrop prompted by increases in the benchmark interest rates of major central banks.

Riot Blockchain stock price

In addition, top projects and firms within this space – such as the Terra ecosystem, the Celsius network, and more recently, the cryptocurrency giant FTX exchange - have suffered a collapse, which rippled through the markets. 

This resulted in sharp declines in digital assets across the board.  Bitcoin (BTC) fell 65% in 2022, as of 19 December, while altcoins such as cardano (ADA) and solana (SOL) suffered drops of 80% and higher.

Bitcoin (BTC) live price chart

The fall of cryptocurrency prices has a direct impact on the financial performance of Riot Blockchain as its mining operations generate less revenues.

Hence, the stock has become a target of short-sellers, who are increasing their bets against RIOT since late August, as indicated by the RIOT short interest.

Short sellers borrow the shares of a company with the expectation that their value will decline in the future. Meanwhile, a stock’s short interest measures the percentage of the instrument’s float that is currently being borrowed.

According to data from MarketBeat, the number of RIOT shares borrowed by short-sellers increased from 24.44 million in August 2022 to 31.18 million at the end of November 2022. This implies a 30% increase in the Riot Blockchain short interest in just three months. 

BTC/USD

66,058.30 Price
+0.260% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

XRP/USD

0.63 Price
+4.790% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

ETH/USD

3,373.26 Price
-3.200% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

DOGE/USD

0.13 Price
-0.150% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

During that same period, the value of RIOT stock has dropped by 35.1%, meaning that short sellers are mostly sitting on profits as short interest has not yet started to decline. As of 30 November, the RIOT stock short interest stood at 18.6%.

The days-to-cover metric, which measures the number of days that it would take short-sellers to fully fund their open positions, has moved from 1.5 to 2.8.

Is a Riot Blockchain short squeeze likely?

When short interest is high, the likelihood of a short squeeze increases. A short squeeze happens when the price of a heavily shorted asset surges, forcing short-sellers into closing their positions with a loss, pushing the price even higher.

Current headwinds may reduce the likelihood that the value of bitcoin and other digital assets will recover in the near term.

Just a few days ago Mazars, one of the few big accounting firms that provide auditing services to cryptocurrency companies and exchanges, said that it will “temporarily pause” its work for crypto clients, including audits of their proof-of-reserves statements.

Even though the Riot Blockchain short interest is running high and its days-to-cover metric is at a level that could prompt a Riot Blockchain short squeeze, the absence of a positive catalyst that can push the value of RIOT higher and take short-sellers by surprise reduces the odds of such an event happening.

What’s next for Riot Blockchain? 

According to data compiled by MarketBeat, the consensus recommendation for Riot Blockchain stock stood at ‘moderate buy’ as of 18 December, with 7 out of 8 analysts rating the stock a ‘buy’ and one a ‘hold’.

The average price target for the stock for the next 12 months stood at $14.7 a share, implying 286% upside potential. The highest 12-month target was $46 and the lowest $7.

In both November and December, analysts from B. Riley, DA Davidson and Northland Securities lowered their price targets for RIOT stock right after the company issued its latest quarterly report.

“The profitability of miners is a discussion that comes up every time bitcoin is down — and then perceived as a problem for all crypto”, commented Anders Kvamme Jensen, the co-fund manager of AKG Digital Assets, to the Financial Times.

Meanwhile, Chris Crawford, the Chief Investment Officer of Crawford Fund Management, told the media outlet: 

“Because crypto is trading vastly below where it was before, and they [miners] have a lot of expenses, it’s not clear they will ever be able to turn a consistent margin."

Final thoughts 

Note that analysts’ predictions can be wrong and shouldn’t serve as a substitute for your own research. Always conduct your own due diligence on an asset before trading, looking at the latest news, fundamental and technical analysis, and a wide range of commentary.

Remember, past performance does not guarantee future returns. And never trade more money than you can afford to lose.

FAQs 

What is the short interest in Riot Blockchain?

As of 30 November, the Riot Blockchain short interest stood at 18.6%, according to data from MarketBeat.

Will a Riot Blockchain squeeze happen?

Even though the RIOT short interest is running high, overall turmoil in the crypto industry could reduce the likelihood of such an event happening in the near future.

Should I invest in Riot Blockchain?

Whether Riot Blockchain stock is an appropriate investment for you should be based on your own research, risk tolerance, portfolio composition, investing strategy and other personal factors. Always conduct your own due diligence before investing.  

Markets in this article

BTC/USD
Bitcoin / USD
66058.30 USD
174.2 +0.260%
ADA/USD
Cardano / USD
0.41627 USD
0.00307 +0.750%
SOL/USD
Solana / USD
181.0465 USD
6.105 +3.510%
RIOT
Riot Blockchain, Inc.
11.37 USD
-0.26 -2.250%

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