The Argo Blockchain share price is crashing. Should I buy now?

The Argo Blockchain (LSE: ARB) share price has crashed this week. The stock has fallen in value by 30% since 12 April. And since reaching an all-time high of around 248p on 17 February, shares in the cryptocurrency miner have lost more than 40% of their value.

However, from a longer-term perspective, the stock has still generated outstanding returns for investors. Over the past 12 months, the Argo Blockchain share price has gained 4,500%. 

Considering this and the company’s performance over the past seven days, I’m starting to wonder if now could be an excellent time to begin buying Argo shares to take advantage of the recent price decline. 

Long-term potential

Before I buy into a company that’s seen its value fall dramatically, I always try and understand why the stock has performed in the way it has. With the Argo Blockchain share price it isn’t entirely clear why the shares have fallen recently.

The company’s latest trading update was incredibly positive. Mining revenues reached a record high, and the amount of Bitcoin and bitcoin equivalents (BTC) on the group’s balance sheet also rose to an all-time high. 

What’s more, earlier this week, the Bitcoin price hit another all-time high. This should translate into higher mining revenues for the company and increase the value of the assets on its balance sheet.

From a fundamental perspective, it seems to me as if the company’s outlook has only improved over the past seven days. If this is the case, why has the Argo Blockchain share price performed poorly over the past week?

I think its valuation is to blame. As I’ve noted before, as investors have rushed to buy into the company over the past 12 months, the stock’s valuation has reached stratospheric levels.

And while its underlying fundamental performance has improved, it doesn’t seem as if it’s improved enough to justify the high valuation.

Argo Blockchain share price outlook 

One of the big problems with investing in high growth businesses such as Argo is that they’re challenging to value. As long as they continue to grow, investors may be willing to continue to pay a high price. But when growth stutters, the value of these companies can drop quickly. I think that’s precisely what’s happening with Argo today. 

Unfortunately, this implies the shares may continue to fall in the long term. However, if the company’s fundamentals continue to improve over the next 12 months, I think the shares should begin to reflect this growth sooner or later. 

As such, I’d use the recent decline to start buying a small number of shares. The Argo Blockchain share price may continue to fall in the near term, which is why I’d only build a small position. Nevertheless, if its revenues continue to increase, I think its long-term potential could be exciting.