The Argo Blockchain (LSE:ARB) share price is no stranger to volatility. It’s up over 2,500% in a year and since the end of 2020, it has been on a tear higher, increasing tenfold between December and February. Since then, volatility has remained high, but not in a trend higher. It’s been shifting lower since February, although there have been some exceptional moves. For example, a jump of 22% on Friday. What happened here?
No hard facts driving the move
Although I wouldn’t classify Argo Blockchain as a Reddit stock, the share price is still impacted by social media and chat forums. In my opinion, this looks to be one of the main drivers behind the move higher on Friday.Â
For those not familiar, a Reddit stock (or meme stock) is a new term coined to refer to the retail investing collective. This collective is found on websites such as Reddit, posting their thoughts on what stock to buy or sell. The large following this has garnered in recent months has meant that shares have actually been pumped higher from this activity.Â
On Friday, various rumours surfaced, including one that Tesla had bought a stake in Argo. Other comments indicated that the Argo Blockchain share price was undervalued at levels below 100p, triggering buying. Even though both factors are subjective, it clearly sparked a reaction with the rally that was seen.
Interestingly, the Argo Blockchain price has historically had a good correlation to the price of Bitcoin. When the Bitcoin price jumps, Argo Blockchain shares usually do the same. Yet on Friday, the Bitcoin price remained fairly stable around the $31,000 level. So clearly the move in share price cannot be attributed to this correlation.
I’m staying away from the Argo Blockchain share price
From a fundamental point of view, I think the retail-fuelled spike on Friday could be short-lived. Earlier in July, the monthly update on progress was released. Mining volume was higher than May by one Bitcoin value, but revenue fell by over a million pounds. This was in part on the reflection of the lower value of Bitcoin during this period.Â
Personally, I do think that cryptocurrency has a role in the future of payments and finance, but think this is still many years away before mainstream acceptance. As a result, I don’t think the Bitcoin price will materially move higher over the next year or so. Based on my view, I struggle to see Argo Blockchain shares outperforming expectations.
Another reason I wouldn’t be buying now is due to that ‘takeover’ by the Reddit army. Any stock that generates large interest on these sites sees the share price distorted by higher volatility. It makes it very hard for a traditional investor like myself to accurately gauge a fair price for the company.
I could be wrong here, with the 22% spike leading to more interest. This could push the share price even higher still this week, even if it’s based more on speculation that hard facts. If I was happy to buy for a momentum-based play, this could be attractive. Ultimately, it’s not where I feel comfortable, so will be staying away.