Argo Blockchain (LSE:ARB) continues to publish positive results, yet its share price is still falling rapidly. The stock produced a stellar return of around 3,000% over the last 12 months. But since around mid-February this year, it’s lost nearly half its value. And so far this month, it’s lost 20%. What’s causing this disappointing performance?
The dwindling Argo Blockchain (ARB) share price
I’ve previously explored Argo Blockchain’s business model. But as a quick reminder, the business is engaged in the mining of cryptocurrency. Using powerful computers, it validates financial transactions and receives tokens for its efforts such as Bitcoin. These can then be sold on cryptocurrency exchanges in a similar way to buying and selling stocks.
So what’s been happening of late? Tesla CEO Elon Musk has made quite a few headlines recently. After initially being an avid supporter of Bitcoin and even allowing individuals to buy cars using the decentralised currency, he’s made a U-turn. In a recent tweet, he announced Bitcoin will no longer be an accepted form of payment due to the environmental impact of miners. After all, running the vast computer arrays at maximum capacity uses a lot of electricity.
The announcement seems to have spooked cryptocurrency investors. The price of Bitcoin fell by more than 10% within 24 hours and continues its downward trajectory today. Given that Argo Blockchain’s core value is mainly driven by the price of Bitcoin, I’m not surprised to see the ARB share price fall by a similar amount on the news.
Looking to the future
The concern surrounding the effect of cryptocurrency miners on the environment has been building up for quite some time. But Argo Blockchain has already begun to address this issue. Two days after Musk’s tweet, the company signed the Crypto Climate Accord. Under this agreement, signatories will strive to achieve net-zero emissions from electricity consumption by 2030. This certainly serves as a vote of confidence for crypto investors. But I don’t believe it’s enough to counteract the recent drop in the ARB share price. At least, not in the short term.
Aside from this development, Argo Blockchain continues to make substantial progress. The company has just purchased an additional two data centres that increase its mining capacity by 20MW. What’s more, both are powered by renewable energy provided by nearby hydro-plants.
And looking at its operational report for April, the firm successfully mined 163 Bitcoin & Equivalents bringing its total balance to 936. This is actually down from 165 in March. But due to rising margins, overall revenue for the period came in at £6.7m versus £6.57m.
Time to buy?
While the loss of Tesla’s support for Bitcoin is undoubtedly disappointing, it’s ultimately a short-term problem, I think. Having said that, I’m personally not interested in adding this business to my portfolio, even at the current ARB share price.
I won’t deny the potential growth opportunity that lies before the company. But I think there are plenty of similar growth opportunities available elsewhere for a much better price and far less risk.