Argo Blockchain (LSE:ARB) is a cryptocurrency mining company. A lot of the success of the business is dependent on the value of the coins (e.g. Bitcoin) that are mined. With the Bitcoin price below $20k, some are still optimistic about high returns over the next year. If this happens, here’s where I think Argo Blockchain shares could go.
Why the Bitcoin price matters
As highlighted in the H1 results, Argo mined 939 Bitcoins and equivalent coins during the period. Yet even though this was up 6% on the previous year, the actual financial value of this revenue was lower by 14%. This difference was due to the fall in the Bitcoin price in the interim.
The business does have other ways of growing revenue. For example, increasing capacity with the new facility in Texas. But fundamentally, revenue will always need to be translated from Bitcoin to US dollars for accounting purposes.
For investors, the value of Argo Blockchain depends in part on the financial success of the company. The lower revenue and profits is one reason why the share price is down 70% over the past year.
Good news for Argo Blockchain shares
The Bitcoin price was last at $40k back in early May. Some friends that are very active in the crypto space is forecasting for it to reach that level within the next year. I acknowledge that trying to forecast crypto moves is very difficult, so take this with a pinch of salt! However, it could happen if we see general risk sentiment improve. Alternatively, crypto in general could benefit from investors that are trying to diversify their investments away from just traditional stocks.
Whatever the reason, I think Argo Blockchain shares could also rally hard if this scenario happened. Aside from the financial benefit it would get, I think the share price would gain as it’s one of the few crypto-related stocks listed publicly in the UK.
For example, an investor might not feel comfortable buying crypto directly. Instead, they may feel safer buying a listed stock like Argo Blockchain. Given the share price correlates to the movement of the crypto space, it’s a way of dipping a toe in the water. So if the Bitcoin price starts to move higher and it’s back in all the media outlets, interest in crypto stocks should also increase.
Time to get involved?
I do think that in the long term, the Bitcoin price will be higher than it is currently. This is based on the amount of projects it can be used for. As a result, I also think that Argo Blockchain will be able to be profitable in years to come, thanks to the higher coin prices.
The problem I have is that I’m already invested in Bitcoin. So buying Argo Blockchain shares increases my exposure to this sector. It’s a bit like me owning gold and then buying a gold-mining stock. It doesn’t really make sense. Rather, I want to use my stock portfolio to diversify away my crypto risk by investing in companies from unrelated sectors.
On that basis, even though I’m bullish on Bitcoin and crypto shares, I’m not going to buy Argo Blockchain stock.
The content in this article is provided for information purposes only. It is not intended to be, neither does is constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.