The Argo Blockchain (LSE: ARB) share price remains a little distance off February’s all-time closing peaks of 284p per share. But, at 245p, this UK cryptocurrency share is still up a staggering 8,800% over the past 12 months.
It’s no surprise that Argo Blockchain’s share price has tracked the prices of digital currencies lower over the past month. Royal Dutch Shell’s share price tends to fall when oil values slip, of course. Similarly, falling iron ore prices can take a bite out of Rio Tinto’s share price. But what can we expect Argo’s share price to do next?
On the plus side
There are several factors that could drive the Argo Blockchain share price to new record highs. These include:
#1: Increasing legitimacy. The past 12 months has been an important period in boosting the perceived validity of cryptocurrencies as a bona-fide new asset class. Major companies such as payments operator PayPal, carmaker Tesla, software giant Microsoft and travel operator Expedia are just a handful of the dozens of firms which now accept payment with digital currencies. Banks, including JP Morgan and Goldman Sachs, are also looking increasingly anxious to get exposure to the crypto arena too. This rising acceptance by blue-chip companies could well keep driving up prices of Bitcoin and similar assets.
#2: Ambitious growth plans. Argo Blockchain is investing heavily to deliver strong and sustained profits growth. It raised £26.8m earlier this month through a share placing in order to “further invest in and expand [our] mining infrastructure,” the business said. It spent almost a quarter of this amount to build its stake in fellow crypto asset company Pluto Digital Assets. Argo has also announced plans to build a gigantic new mining centre in West Texas during the next 12 months.
Could the Argo Blockchain share price fall?
That said, there are real reasons why the Argo Blockchain share price could fail to replicate the stunning gains of the past year. Firstly, while major companies like those mentioned above are becoming more receptive towards digital currencies, regulators and lawmakers are yet to be won over.
Although it’s been a few years since the launch of a Bitcoin-backed exchange-traded fund (ETF) was proposed, none have so far made it off the ground. Regulatory risk is a big danger to Argo’s share price.
Argo Blockchain also doesn’t have any ‘barrier of entry’ (as Warren Buffett puts it) which gives it an advantage over any new kids on the block. Basically, anyone can set up and start mining digital currencies with enough money. And the soaring prices of Bitcoin et al could lead to a flood of new entrants emerging before too long.
It’s been fascinating to observe the rocketing Argo Blockchain share price over the past year. But I won’t be adding the tech company to my own Stocks and Shares ISA.
Bitcoin prices remain extremely volatile and there are significant regulatory and operational problems like those I mentioned above that could smack Argo’s bottom line and yank the share price significantly lower.