Argo Blockchain (LSE: ARB) had been in a bit of a slump since the middle of September. That brought to an end a recovery that had been going on since July. But now, the ARB share price has spiked sharply, up 10% at the time of writing Friday afternoon, to 122p.
ARB shares did reach a brief peak of 360p in March, so we’re looking at a substantial fall since then. But investors who got in 12 months ago are up 2,100%, and I doubt they’ll be complaining. Still, for those of us who didn’t, is it a good time to buy now?
I personally wouldn’t hold cryptocurrency. At least, no more than a bit of play money, but certainly not any substantial investment amount. But that doesn’t mean I’d automatically reject any company in crypto services of some kind. Like crypto miners, for example.
So what’s driving the ARB share price? Usually it’s simply the Bitcoin price. As Bitcoin goes up, so does the ARB share price, and when one falls so does the other. But that’s not what’s happening now. No, since the end of September, the Bitcoin price has been rising, while the Argo Blockchain share price has continued on down. Until Friday’s jump, that is.
The lack of interest from investors wasn’t helped by the company’s September mining activity. The 165 Bitcoin or Bitcoin Equivalent (BTC) mined in the month amounted to a 20% drop from August’s 206 BTC. The month’s revenue declined too, from £6.83m in August to £5.50m.
Bitcoin holdings
At the end of September, Argo owned 1,836 BTC. At today’s Bitcoin price, that’s a total value of $110m, or £80m. The company currently has a market cap of a little over £575m. So there’s a lot of value being placed on future mining activity there. Mining should expand quickly once Argo gets its new Texas operation going, and that should be online by mid-2022. I could see a strong run for the ARB share price as we approach the switch-on date.
Against any bullishness, though, is the increasing threat of regulation. China has already brought in a ban on cryptocurrency transactions. Governments, of all descriptions, just don’t like their citizens having access to money they can’t see. I think an actual ban in Western countries is unlikely. But I really can see increasing moves to regulate the market. There have already been calls on the US Securities and Exchange Commission for regulations, for example, and that’s arguably the freest market in the world.
ARB share price premium
So what do I think? I can see this current uptick gathering steam. And I wouldn’t be at all surprised to see the shares end the year ahead of where they are now.
The fun side of me wants to buy a small stake, just for entertainment, and with the prospect of risky profits as a bonus. But the sensible side sees too high a premium in the ARB share price, and no real safety margin. Once again, sensible wins, and I will remain a spectator.