The Argo Blockchain share price: should I buy the stock or stay away?

The Argo Blockchain (LSE: ARB) share price has plunged this week. At the time of writing, shares in the cryptocurrency miner are dealing at around 213p, down from their 52-week high of 340p reached only a few days ago. 

However, despite this performance, the stock is still up more than 3,400% over the past 12 months. Could the latest pullback be an opportunity for me to buy this high-flying stock at a lower price?

What’s behind the Argo blockchain share price decline? 

Past performance should never be used as a guide to future returns. Therefore, while the stock has been a winning investment over the past 12 months, it doesn’t guarantee it will continue to be so. 

One of the things I always try to get my head around before buying an investment is the reasons behind its recent performance. I want to understand why the stock has performed the way it has. This could give me some insight into what the future holds for the business. 

When it comes to the Argo Blockchain share price, it seems the stock’s become somewhat of a proxy for Bitcoin. As the price of the cryptocurrency has surged in recent weeks, shares in the cryptocurrency mining business have jumped as well. 

As Argo both owns and mines Bitcoin, this makes sense. The higher the price of the cryptocurrency, the more revenues the business can produce. The value of Bitcoin on its balance sheet will also increase. This should translate into a higher share price. 

However, Bitcoin can go up as well as down. In the past few days, its value has fallen from an all-time high of over $58,000 to around $48,000 at the time of writing. 

Therefore, it seems to me the price of Bitcoin will dictate the outlook for the Argo Blockchain share price. That makes it especially challenging for me to put a value on the shares. 

Bitcoin price troubles

Bitcoin is incredibly volatile. The latest sell-off was triggered by Elon Musk tweeting that he thought the value of the cryptocurrency seemed “high.” That said, the rally in the first place was inspired by Musk’s electric car manufacturer Tesla’s decision to invest $1.5bn in the cryptocurrency. 

If other companies follow the electric vehicle manufacturer, it could continue to increase and recover from current levels. That would be positive for the Argo Blockchain share price.

What’s more, as companies like Tesla start accepting cryptocurrencies, they may become mainstream, which would drive a virtuous cycle. User growth would attract more users, increasing prices and driving more interest in Bitcoin and its peers. That’s the best-case scenario. 

On the other hand, Bitcoin’s volatility could damage its reputation. The fact that a single tweet could cause it to fall in value by more than $10,000 is notable. I think this kind of volatility makes it impossible for me to place a value on the Argo Blockchain share price. It suggests the company’s own fundamentals are irrelevant. Instead, its fortunes could be tied to the success or failure of Bitcoin.

As such, I’m not going to buy the stock for my portfolio today. Other investors may be comfortable with the level of uncertainty here, but I’m not.