Shares of Riot blockchain (NASDAQ: RIOT) crashed on Wednesday despite a lack of company-specific news. As of 12:30 p.m. EST, the stock was down 11%. Bitcoin’s price is likely to have some impact on the stock today. Additionally, investors might be digesting news recently released by the company even though it wasn’t released today.
According to CoinDesk, the price of Bitcoin has fallen 6% in the past 24 hours. Cryptocurrencies are volatile, so it is only a guess to explain why Bitcoin is not currently available. It does affect Riot Blockchain, however. To put it simply, the company provides computers to run the Bitcoin blockchain network on and is paid for in Bitcoin tokens in return. But it regularly liquidates tokens to pay the bills. If Riot Blockchain were to sell Bitcoin today, it would hypothetically get 6% less than it did 24 hours ago. This is important.
Yesterday, Riot Blockchain announced that its new bitcoin mining equipment had arrived. The company is hoping it will be operational this week, and the next shipment is expected later this week. This news is unlikely to cause the stock to fall – if anything, this is likely good news for Riot Blockchain shareholders.
By the end of this week, Riot Blockchain should be mining at 842 petahashes per second (PH / s). This is based on the commissioning of 9,540 Antminers. 28,000 more are to be added by October. By then, the company expects a hashrate of 3.8 exahashes per second (EH / s) – 4.5 times more than by the end of this week.
The higher a bitcoin miner’s hashrate, the more bitcoin he can earn. However, this is relative to the total hash rate of the Bitcoin blockchain network. According to Blockchain.com, the total hash rate is currently around 150 million terahashes per second (TH / s), or 150 EH / s. The hashrate has increased significantly over the past year as the rising price of Bitcoin entices more miners to get away with it either connect to the network or increase its performance. And it is very likely that the total hashrate will continue to increase.
On the one hand, it’s good for Riot Blockchain to increase its mining performance – it helps it get a bigger Bitcoin payout. However, as the hashrate increases, companies like Riot Blockchain still need to spend money to keep up. This can be an expensive business model, and is one reason why bitcoin mining stocks like Riot Blockchain may not be the safest long-term investment.