RIOT - Riot Platforms stock price went parabolic but risks remain

2024-07-16 06:01:00 ET

Riot Platforms (NASDAQ: RIOT) stock price bounced back on Monday, joining other Bitcoin mining companies like Marathon Digital, Core Scientific, Cipher Mining, and CleanSpark. It soared to a high of $11.50, its highest point since April 25th.

Bitcoin price rebounded

Riot Platforms shares jumped because of the recent Bitcoin price action. After tumbling to a low of $53,700 earlier this month, Bitcoin has rebounded to the key resistance point at $65,000.

There were a few catalysts for this movement. First, Germany has now concluded moving over 50,000 Bitcoins to exchanges, an important step in its liquidations. While Bitcoin dropped to $53,700 last week, its performance during this sell-off was better than expected.

Second, Bitcoin and other cryptocurrencies cheered the recent Donald Trump shooting at a rally in Pennsylvania. The shooting, coupled with the recent debate, has led many people to speculate that Donald Trump will win in the next election.

Most polls have him leading in most states. A Donald Trump win will be positive for cryptocurrencies since he has come out in support of the industry. He even has a crypto portfolio worth over $10 million, according to Arkham .

A Trump win will usher in another Securities and Exchange Commission (SEC) chair. Most participants in the crypto industry don’t like Gary Gensler, who has sued most companies like Coinbase and Binance.

Third, Bitcoin price rallied because of the dovish Jerome Powell statement . In it, Powell noted that the bank would continue consider cutting interest rates if the labor market continued to worsen.

The most recent data showed that the US jobless rate rose to 4.1% in June, its highest point since 2021. With inflation falling, analysts predict that the Fed will start cutting interest rates in September.

Cryptocurrencies and other risky assets do well when the Fed has turned dovish. For example, most of them rallied earlier this year as optimism that the Fed would deliver five rate cuts in 2024.

Finally, Bitcoin soared after piercing the important resistance point at $60,000, where it has failed to move before.

Risks for Riot Platforms stock

Still, several risks could drag the Riot Blockchain stock downwards. First, the company will likely publish weak financial results on July 31st because of lower prices and production. Analysts expect the data to show that its revenue slowed to $75.54 million in the second quarter from $79.3 million in Q1.

The most recent data showed that the company mined 255 coins in June, a 45% drop from 460 in the same month in 2023. It mined 215 coins in May, down from 375 in April.

While Bitcoin price has risen in the past few days, it remains in a deep bear market. As a result, there is a likelihood that the company will report a loss after making a $211 million profit in the first quarter.

The other risk is that the ongoing Bitcoin recovery is part of a dead cat bounce, since it has formed a double-top pattern.

Riot Platforms stock price analysis

The daily chart shows that the RIOT share price bottomed around $9 earlier this month. It has failed to move below that level since October last year.

The stock has now bounce back above the key upper side of the descending trendline shown in green. It has also risen above the 50-day moving average while the Relative Strength Index (RSI) is nearing the overbought level.

Therefore, I suspect that the stock will resume the downward trend and retest the green descending trendline at $10. If this happens, it will likely drop to the lower side of the ascending line.

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