Argo Blockchain (LSE: ARB) has made a lot of money for investors interested in Bitcoin in 2021. Over the past 12 months, the Argo Blockchain share price has soared by more than 2,500%, and that’s mostly come this year. But it has been a lot higher. The shares exceeded 300p in February, but have since shed 55% of that valuation.
That includes a loss of 7% on Thursday, ending the day at 135p, and it’s all down to Tesla and its CEO. On Wednesday, Elon Musk sent out a tweet telling us that Tesla would no longer accept Bitcoin as payment for its vehicles. That reversed a decision to accept the cryptocurrency in March. And it’s due to not wanting to be associated with the energy costs of crypto mining.
But that’s the whole point of crypto mining. If it could be done quickly, with little in the way of costs, we could all be mining heaps of it every day. And then what would happen to its value?
Argo Blockchain share price down
But what of the Argo Blockchain share price crash? Does it tip the balance in favour of buying now? Argo’s business model is simple. It buys computers, and uses them to mine Bitcoin. So it’s a play on the Bitcoin price without buying the stuff itself. I suppose it can be seen as a bit like investing in gold miners, rather than the shiny metal itself, in the hopes of gearing up the profits when gold rises in value.
So if Bitcoin should appreciate in price, then the profit margin for Argo Blockchain should grow by a greater percent (after paying for the resources to mine it). At least that seems to be the investing rationale behind the Argo Blockchain share price progress in 2021.
The current share price values the entire company at approximately £515m. That’s the equivalent of around 14,400 Bitcoin. According to its April update, Argo mined 163 Bitcoin, or Bitcoin equivalent (BTC), in the month, down from 165 BTC in March. At the end of April, the company held 936 BTC. At today’s prices, that’s worth approximately 6.5% of the current valuation of the company. It seems there’s a long way to go yet, before asset values reach the Argo Blockchain share price.
Future asset generation
There are two ways for the company’s crypto holdings to grow. One is to keep mining, and it would take about another six and a half years to reach the equivalent of today’s market-cap. Or possibly longer if it has to sell some to pay the electricity bills. The other way is for the Bitcoin price to keep on rising. In reality, it’s going to be a combination of the two. Unless Bitcoin falls instead of rising, that is.
Is this a good moment to remind myself that past performance is not an indicator of future performance? I think it is.
Will I buy Argo Blockchain shares? In the right circumstances, I could well buy shares in a Bitcoin miner — just as I could buy gold mining shares without ever wanting to own the metal. But not in these circumstances, not at the current Argo Blockchain share price. Maybe if it falls further…