MicroStrategy (MSTR) and Riot Platforms (RIOT) represent two different ways to invest in Bitcoin (BTC) and have skyrocketed the price of Bitcoin this year. For reference, software company MicroStrategy has gained notoriety by accumulating Bitcoin over the past three years. Riot has made a name for itself as a leading Bitcoin mining company, using its massive fleet of high-end miners to mine BTC. While Riot's stock is up 310% this year, MicroStrategy's stock is up over 290%. Still, deciding whether investors should chase one of these high-flying Bitcoin-related stocks is a more nuanced discussion than the numbers might suggest.
MicroStrategy manages two separate companies
MicroStrategy was founded about 34 years ago and is, at its core, an aging analytics and data mining company. But even as the company has expanded its ecosystem to include additional cloud and mobile services over the past twenty years, it has struggled to keep up with higher-growth cloud giants like Amazon and Microsoft. Because of this, the company's revenue only grew at a compound annual growth rate (CAGR) of 1% between 2010 and 2020.
Nevertheless, then-CEO and co-founder of MicroStrategy, Michael Saylor, kept a steadfast eye on BTC-USD prices, eventually leading the company to invest in large Bitcoin purchases. Since his first notable purchase worth $250 million, his BTC holdings have grown to $4.7 billion in the last quarter. Currently, MicroStrategy holds 158,400 BTC on its balance sheet with an average purchase price of $29,586. Although the current BTC impairments have caused the company to remain unprofitable for over three years, it is expected to return to profitability sooner rather than later.
Riot Platforms is more straightforward
Riot was once a tiny patent company called Bioptix. In 2017, the company abandoned its original business model in favor of BTC mining. Riot purchased tens of thousands of high-quality Antminers and had a massive fleet of 112,944 miners in use by the end of November. The company sells hundreds of Bitcoins every month to increase its liquidity. However, Riot still holds a market value of $306 million (7,358 BTC) on its balance sheet.
Although its business model is much simpler than MicroStrategy's, it is directly dependent on volatile energy and BTC market prices. While its net loss widened in 2022, Riot's revenue rose to $259 million. Current analyzes assume that sales will increase again by up to 14% and that the net loss will decrease. Its profits could skyrocket if BTC price rises while inflation falls. Riot is likely to be much cheaper than MicroStrategy as the former plans to continue selling its excess power back to the grid, effectively stabilizing its long-term operating margins.
Which purchase is better?
Many are leaning towards Riot Platforms as the more sensible investment of the two. Since purchasing Bitcoin directly could be the best option overall, Riot offers a better model as it is much easier. Additionally, Riot has a healthier balance sheet and more stable growth rates. However, it is strongly recommended to take a closer look at all options before investing. Both MicroStrategy and Riot Platforms are capital-intensive companies. So keep this in mind if you decide to invest instead of buying BTC outright.
Disclaimer: The above text is a promotional article that is not part of the editorial content of Cryptonews.com.
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