As I write, the Argo Blockchain (LSE: ARB) share price is down 77% over the past 12 months. And it’s lost 30% just in the past month. Shareholders have had a dramatic ride over the past couple of years. First the stock spiked massively in early 2021, but then it went into steady decline.
The latest dip comes on the back of falling cryptocurrency prices, with Bitcoin going into a renewed dive in June. Right now, the blockchain money is valued at $20,200 per coin. That’s a long way short of its November 2021 peak at nearly $69,000. So is it time for investors to dump Argo Blockchain shares, or time to buy?
What do the experts say?
Warren Buffett once suggested we should be greedy when others are fearful. But then, he also famously referred to Bitcoin as “rat poison squared“. So maybe his thing about being greedy doesn’t apply in this case.
More recently, Bank of England governor Andrew Bailey warned investors about cryptocurrencies, saying: “If you want to invest in these assets, okay, but be prepared to lose all your money.”
Are these two high-profile naysayers right? Are we heading for the end of cryptocurrency investing, and the end for crypto miners like Argo Blockchain?
Always consider the risk
I do think investors should consider these warnings about cryptocurrency risks before buying shares in a crypto miner. But I think the same about any form of investing, and I investigate the risks of any individual stock I invest in.
But I do think that rumours of the death of cryptocurrency miners are premature. Even if Bitcoin has fallen in price, Argo Blockchain still has sufficient margin to bank its profits.
In its most recent operational update, the company reported a mining margin of 62% in May. That’s down from a 75% margin in April. It resulted in mining revenue of £3.07m, even if that is a dip from £5.52m in April.
Dip in revenue
The drop in margin was only partly due to lower Bitcoin prices. Argo also mined less in May, and that contributed to the reduction. It added 124 Bitcoin or Bitcoin equivalents (BTC) to its stash during the month, compared to 166 BTC in April.
Part of the reason for the fall in production was interesting. Argo temporarily shut down its operations in Texas when hot weather led to extra energy demand and higher power costs. That seems a bit ironic for an industry that faces accusations of contributing to global warming.
No death yet
So what’s really happening now? In dangerous economic times like those we currently face, investors will typically sell out their risky options and put their money somewhere safer.
And that might be all that we’re seeing. I would always expect Bitcoin, and crypto miners, to suffer every time there’s an ‘investor flight to safety’.
Does it mean I’d buy Argo Blockchain shares now? No. That’s simply because I have no idea how to put a fair valuation on the company. So if this is genuinely a buying opportunity, it’s one I’ll miss.