Better Buy: Bit Digital vs. Riot Blockchain

Investors have experienced a volatile ride over the last 12-months primarily, driven by the uncertainties fueled due to COVID-19. The markets turned bearish in late February last year, making investors extremely cautious. However, the snap-back rally in the equity market was unprecedented, led by tech stocks, driving broader indices to record highs by the end of 2020.

Alternate asset classes, including cryptocurrencies, also surged higher which brought crypto-mining stocks such as Bit Digital (BTBT) and Riot Blockchain (RIOT) into focus. These crypto mining stocks are strongly tied with the price of bitcoin and other digital currencies.

For example, while Bitcoin surged 350% in market value last year, shares of Bit Digital and Riot Blockchain rose by a staggering 5,380% and 1,420%, respectively. So, if you’re an investor that is interested in the crypto space, it makes perfect sense to track these mining companies.

Let’s take a look at BTBT and RIOT to see which is the better investment right now.

Bit Digital began mining Bitcoin in early 2020

BTBT began mining Bitcoins in February 2020 and currently operates 2,253.5 PH/S of Bitcoin Hash Rate across the entire Bitcoin network, making it one of the largest bitcoin mining companies listed on the NASDAQ.

In the third quarter of 2020, the company generated $7.91 million in sales from bitcoin mining. The number of bitcoins it mined was 739.51 in Q3 and Bit Digital ended the September quarter with a total of 22,869 miners.

Its net income from continuing operations stood at $0.10 million in Q3, compared to a net loss of $1.79 million in the prior-year period. Until November 2020, Bit Digital mined a total of 1,220 bitcoins currently valued at $41.71 million.

The company is expected to improve its bottom-line drastically in Q4 given the exponential rise of bitcoin towards the end of 2020. However, investors should note that the forthcoming results of Bit Digital are already priced-in given the stock’s stellar growth in the last year.

Riot Blockchain

Unlike other mining companies, Riot Blockchain aims to build and operate the blockchain technology ecosystem. Riot Blockchain not only mines bitcoin, but it also provides accounting, auditing, and verification services for blockchain assets.

Riot Blockchain managed to increase sales by 21% year over year in the first three-quarters of 2020 to $6.7 million, compared with $5.6 million in the same period in 2019. In the September quarter, Riot’s mining sales soared 41.5% to $2.4 million as it mined 730 bitcoins in Q3.

The company is investing heavily in capital expenditure and now has 9,540 Antminers that mine the digital currency. It deployed 2,500 Antminers in January, which cost the company $6.1 million.

The verdict

If bitcoin continues to gain momentum, shares of Bit Digital and Riot Blockchain will most likely surge as well. However, bitcoin and the entire crypto segment are expected to remain highly volatile in the near future. If the price of bitcoin plummets, so too will the stock prices of Bit Digital and Riot Blockchain. 

Investing in bitcoin mining companies are for investors that are looking for high risk/high reward scenarios.  While both BTBT and RIOT have crushed market returns recently, Riot Blockchain seems to be a better bet, given its higher market cap and rising profitability.

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RIOT shares were trading at $20.75 per share on Tuesday afternoon, up $0.77 (+3.85%). Year-to-date, RIOT has gained 22.13%, versus a 2.48% rise in the benchmark S&P 500 index during the same period.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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