Bitcoin Miner Riot Platform's Stock Plummets On Kerrisdale Short Report: Buying The Dip?

Riot Platforms, Inc. RIOT experienced a sharp decline following a bearish report from Kerrisdale Capital's Founder and Chief Investment Officer Sahm Adrangi.

The immediate market reaction was significant. Riot’s stock plunged over 5% by 12:30 p.m. ET on Wednesday.

This sharp decline in share price has raised questions among investors about whether this dip represents a buying opportunity.

Kerrisdale Capital Is Short Riot Stock

Adrangi's analysis criticized Riot Platforms, highlighting that the $3-billion company derives more of its value from energy arbitrage and stock issuance rather than actual Bitcoin BTC/USD mining.

Adrangi’s report argues that Bitcoin mining is among the least favorable business models for a public company. The issues cited include unpredictable revenue streams, high capital expenditure requirements, intense competition, the commodity nature of Bitcoin, and mounting regulatory scrutiny, even in traditionally crypto-friendly regions like Texas, where Riot operates.

Riot clapped back against Adrangi in a prepared statement to Benzinga.

“We disagree with the characterization of the Bitcoin mining industry and of Riot, and the equally unsound conclusions reached in the Kerrisdale Capital report,” the company stated. “We believe these errors will be demonstrated through the execution of our ambitious 2024 growth plans and resulting financial performance.”

More on the report here: Riot Platforms Targeted by Kerrisdale Capital’s Short Sell Report: Details

Key Indicators Suggest A Strongly Bearish Trend

The technical indicators for Riot’s stock currently suggest a strongly bearish trend. The share price is trading below its 5, 20, and 50-day exponential moving averages, which collectively indicate significant selling pressure and the potential for further declines.

Chart: Benzinga Pro

• Short-term Indicators: RIOT's current share price of $9.24 is below its eight-day simple moving average (SMA) of $9.88, signaling bearish trader sentiments. Additionally, the 20-day SMA stands at $10.05, reinforcing this bearish outlook.
• Medium-term Indicators: The stock price remains below the 50-day SMA of $10.25, another technical signal indicating a continued bearish recommendation.
• Long-term Indicators: The 200-day SMA is at $11.67, substantially higher than the current price, suggesting a long-term bearish outlook as well.

Chart: Benzinga Pro

• MACD Indicator: The Moving Average Convergence Divergence (MACD) indicator stands at -0.22, further suggesting that Riot Platforms is under selling pressure.
• RSI Indicator: The Relative Strength Index (RSI) is at 40.12, with Riot Platforms’ stock treading towards the oversold territory but not yet at a level that typically signals a strong buying opportunity.
• Bollinger Bands: The Bollinger Bands (20) ranging from $9.12 to $10.97, suggest the stock is trading on the lower end, reinforcing the bearish signal.

Buying The Dip? Caution Advised

Given the current technical landscape and Kerrisdale Capital’s bearish outlook, Riot Platforms appears to be facing substantial downward pressure. The combination of adverse market sentiment and unfavorable technical indicators suggests that investors should approach Riot’s stock with caution.

While the notion of a “buy-the-dip” opportunity may appeal to some, the bearish signals from the moving averages, MACD, and RSI indicate that RIOT stock is more likely to continue its downward trajectory in the near term.

Investors considering entering the market at this stage should be prepared for potential further declines and should closely monitor any shifts in technical indicators and market sentiment.

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