While cryptocurrencies may very well represent the future of finance and investing, the sector isn’t without criticism and controversy. As a result, it’s vital for blockchain miners like Riot Platforms (NASDAQ:RIOT) to be aligned with an accommodating regulatory framework. That’s perhaps the key reason why RIOT stock has gotten off to an auspicious start to the new year.
Since the January opener, RIOT has gained almost 33% of equity value. Much of the enthusiasm is tied to the strong support and sentiment for the underlying crypto market. However, it would be unfair to not mention the giant elephant in the room. With President Donald Trump recently issuing an executive order to bolster crypto markets and provide regulatory and legislative proposals, RIOT stock benefited from a resumption of optimism following a brief lull.
Fundamentally, the tailwind isn’t just centered on the goodwill directed toward decentralized digital assets. Rather, cryptos and their underlying mining protocols consume considerable energy. In 2022, the International Energy Agency estimated that virtual currencies consumed the equivalent of 0.4% of annual global electricity demand. This statistic will only rise in scope and scale given current trajectories.
Had a liberal and more environmentally friendly administration taken power, Riot Platforms and its ilk may have faced a more uncertain future. However, under “The Donald,” circumstances are much more promising, thus incentivizing a bullish approach.
The other elements that support bullishness in RIOT stock fall under the statistical and technical categories. Regarding the latter, RIOT appears to have formed a bullish flag formation, with the base of the “flagpole” established around the beginning of October last year and the downward consolidation (i.e. the flag) materializing between November and early January.
At the moment, RIOT stock appears to be attempting to break out of the flag formation, which is in line with expectations.
In terms of the statistical category, RIOT stock tends to have a neutral to positive bias when its pricing data is viewed stochastically or devoid of outside context aside from the temporal. On a week-to-week basis, there’s about a 49% chance that a position held at the beginning of the period will rise in value by the end of it. Over a four-week period, the odds improve slightly to 51.16%.
However, RIOT stock lost 3.08% for the business week ending Jan. 24. During periods when RIOT loses up to 5% over a one-week period, the odds that the fourth subsequent week will end positively improves to 54.29%. To be fair, that’s not a blisteringly robust improvement. Nevertheless, investors tend to buy the dips in RIOT, adding confidence to the bullish thesis.
Finally, assuming that the optimists win the tug-of-war, the projected upside could be quite massive. Based on statistical trends calculated both stochastically and dynamically, RIOT stock could potentially rise to $16.59 to $17.04 by Feb. 21. If so, the most aggressive investors may consider options strategies to make the most of this high-risk wager.
One potential idea is to consider the 12/15 bull call spread (buy the $12 call, simultaneously sell the $15 call) for the options chain expiring Feb. 21. This transaction presently puts $135 at risk for the chance to earn $165 or a payout of 122.2%.