Riot Blockchain (NASDAQ:RIOT) is one of the original publicly-traded cryptocurrency mining companies. RIOT stock originally rose to prominence in 2007, with shares surging from $4 to $30. However, both the price of Bitcoin (CCC:BTC-USD) and Riot soon plunged.

By the end of 2018, RIOT stock had collapsed to just $2 per share. Part of this was likely tied to the company’s dismal operating results. For 2018, Riot earned just $8 million in revenues while losing $24 million on an operating income basis. The company’s operations continued to produce equally unpleasant results in 2019 and 2020 and the stock didn’t go anywhere.

At the end of 2020 and into early 2021, RIOT stock blasted off as the price of Bitcoin went to the stratosphere. RIOT shares catapulted from $5 to a high of $70. However, once again, Riot has failed to hold its gains. The core problem simply seems to be its structurally low profit margins.

Revenues Are Up, But Profits Aren’t

For full-year 2020, Riot generated $12 million of revenues. After its core mining costs, Riot scored $8 million of gross profits. Not bad. However, Riot spent $13 million on sales, general, and administration (SG&A), along with additional other costs such as depreciation. Overall, Riot lost $10 million in operating income in 2020.

Over the past 12 months, Riot’s revenues soared to $128 million. That’s a tenfold increase in a year. And it got its gross profit up to $82 million. Sounds like a winner, right? However, SG&A surged to $53 million as Riot’s overhead costs exploded. Other costs such as depreciation soared as well. Add it all up, and Riot lost $10 million over the past 12 months; that’s exactly the same loss as it generated in 2020 on far lower revenue levels.

Simply put, Riot hasn’t proven that it can scale the business effectively. Sure, it can grow revenues a ton. But if costs escalate at the same speed, there’s little actual progress being made.

Perhaps the cost of Bitcoin will soar high enough to make absolutely every mining company out there profitable. But, if not, Riot’s bloated cost structure will leave it struggling to compete with firms with more streamlined operations. Mining, be it for actual metals or digital coins, tends to be a commodity business where the low-cost producers have the upper hand.

Plenty of Publicly-Traded Peers

Previously, I highlighted Marathon Digital (NASDAQ:MARA) as a high-risk, high-reward play on the crypto mining space. Marathon is not only one of the leading miners in the industry, it also is holding onto much of the BTC that it mines rather than selling it. This gives Marathon a ton of juice to potential higher crypto prices. On the other hand, if crypto sinks, MARA stock could be in a world of hurt since it isn’t selling all its output for dollars immediately.

Other players such as Stronghold Digital Mining (NASDAQ:SDIG) and Bitfarms (NASDAQ:BITF) have an appeal based around very low mining costs per unit and unique features such as owning their own power plants. To give a sense of the difference in cost, consider that Bitfarms generated $48 million of operating income over the past 12 months from $121 million of revenues. Riot, while producing a similar amount of revenues, lost money.

If you look beyond the American markets, there are even more crypto-mining companies. Look around at exchanges such as the Canadian one and there are a variety of firms with different business plans to profit from the opportunity in crypto mining.

All that to say that Riot is hardly the only way to get exposure to crypto mining. Riot has been around for a long time. But it failed to capitalize off the 2017 crypto boom, and it similarly couldn’t generate meaningful profits when BTC soared in last year. At this point, investors may demand more of their crypto mining firms.

RIOT Stock Verdict

I believe investors have given Riot Blockchain a premium valuation for non-economic reasons. Namely, it’s been U.S.-listed for many years and established a brand for itself. When traders think of crypto mining, Riot is one of the first stocks that comes to mind. That’s useful from a corporate perspective, especially if Riot wishes to raise more money with stock offerings in the future.

However, purely from a bitcoin mining economics standpoint, Riot hardly seems like the best option. Alternatives such as Bitfarms seem to give a much more compelling risk/reward profile at the current juncture. RIOT stock might be good for short-term trading, but it’s not the best long-term investment option in this space.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.