Cryptocurrency miner Argo Blockchain (LSE: ARB) released an operational and strategic update today. And I reckon the news suggests the recent dip in the share price could be a buying opportunity. That’s because operational growth looks set to continue in the underlying business.
Steady operational progress
In June, the business mined 167 Bitcoin, or Bitcoin Equivalent (BTC), compared to 166 in May. So it seems production remains steady. And the total amount of BTC mined so far this year is 883.
To put those numbers in perspective, at the end of June, the company owned 1,268 Bitcoin or Bitcoin equivalent. However, since the middle of April, the value of Bitcoin when exchanged for US dollars has plunged by around 50%.
But Argo Blockchain’s mining revenue in June came in at £4.36m, down from £5.51m in May. Considering Bitcoin’s weakness, I’d feared a lower outcome because revenue depends on daily foreign exchange rates and cryptocurrency prices. The directors reckon Argo generated its income at an average monthly mining margin of around 78%, down from 82% in May. Again, the decline isn’t as severe as I thought it might be.
Chief executive Peter Wall said in today’s update there were “big changes” in the Bitcoin sector in June. China’s recent regulatory crackdown reduced the total global ‘hash rate’, because mining machines came offline in China. And the hash rate is the measuring unit of the processing power of the Bitcoin network.
Why the Argo Blockchain share price could rise again
Intriguingly, Wall went on to explain “mining difficulty adjusted to reflect this reduction.” And I reckon that statement contains a suggestion there could be big opportunities ahead for Argo Blockchain with its operations located in North America.
Wall reckons the company capitalised on the changes in the wider market dynamics, leading to ongoing “strong revenue at an impressive margin.”
Meanwhile, other experts in the industry see the potential for positives from China’s stance on cryptocurrency. Many seem to think the initial shakeup will be challenging. But Galaxy Digital’s Mike Novogratz thinks the situation is “a big net positive.” And Gemini security engineer Brandon Arvanaghi thinks “the crackdown means that Bitcoin is working, not that it’s failing.” I reckon that’s a view shared by many Bitcoin believers.
Right now, both the Bitcoin value against the US dollar and the Argo Blockchain share price appear to be trying to consolidate. Nothing is guaranteed or certain, but it’s possible that both could rise from current levels. Of course, like all miners, a big factor in profitability for Argo Blockchain is the prevailing value of the commodity. In this case, Bitcoin.
Argo also announced it’s “exploring” a potential secondary listing on NASDAQ. If that happens, we could see increased investor interest in the stock, which I see as positive. However, even now, I think this share comes with huge risks as well as big potential for shareholders.