Argo Blockchain (LSE: ARB) got off to a cracking start to the week on Monday. After rising even higher in earlier trading, the ARB share price ended the day 24% up. What’s it all about? And should I buy a stock that has already gained 3,200% in the past 12 months?
Well, once again, it’s nothing to do with any developments in the company itself. No, it’s all about Bitcoin and other cryptocurrencies. First of all, let’s put one possibility to bed.
The jump in demand for Argo Blockchain shares is not down to any plans for the UK government to replace the pound with a virtual currency being dubbed ‘Britcoin’ by the press. Chancellor Rishi Sunak quashed such speculation, saying that any exploration of central bank digital currencies would be a complement to the traditional pound.
Enter Amazon
No, it’s all about Amazon which, unsurprisingly, has considerably more influence in the crypto market and on the ARB share price. The surge in interest was spurred by rumours that the e-commerce giant could be set to move into cryptocurrency payments. Those rumours, in turn, were kicked off by a job ad placed by Amazon for a Digital Currency and Blockchain Product Lead.
The ad doesn’t specifically say anything about starting to take payments in Bitcoin or any of the others. But the job is within the company’s Payments Acceptance & Experience team, so the speculation does not appear implausible.
ARB follows Bitcoin
The result was a jump in Bitcoin, which came within a shade of reaching $40,000. And that’s only days after it had just steadied above $30,000. If nothing else, it shows that the ARB share price is a straight reflection of cryptocurrency prices. So could a new long-term Bitcoin surge, and hence an Argo Blockchain surge, really be kicking off now?
These latest Amazon rumours come just days after Elon Musk had put Bitcoin acceptance back on the table at Tesla. And if two space-age techno geeks are possibly backing the stuff, I can see where the bullishness is coming from. But is it justified?
Well, acceptance by major companies like Amazon and Tesla could considerably improve the respectability of cryptocurrencies. One problem, though, is that to behave as a reliable currency, we’d surely need to see some sort of stabilisation in prices. Will that happen? I think electronic currencies will become common. But what they’ll look like, it’s hard to tell.
ARB share price drivers
Will things like today’s Bitcoin be desirable currencies in a world in which central banks issue dollar-denominated cryptocurrencies? Again, it’s too early to say. And we still face the uncertainties of how governments might regulate cryptocurrencies too. These are the issues and questions that, I think, need to be resolved before I can get an idea of how to put a rational valuation on the ARB share price.
So it’s a no for me, for now. But we could have exciting times ahead.