The Argo Blockchain (LSE:ARB) share price continues to disappoint, falling by a further 20% since the start of this month. That brings the total decline to around 55% since its February high earlier this year. For a high-growth stock, this isn’t a pleasant sight. Over the last 12 months, the ARB share price is still up by an astounding 2,900%. But the question remains, what is causing it to fall now? Let’s take a look.
ARB share price shows weakness
As a reminder, Argo Blockchain is a cryptocurrency mining business. And I’ve actually explored some of the contributing factors behind its dwindling share price before, mainly focusing on the weakening of its underlying asset – Bitcoin. Since then, additional regulatory pressure has started to mount. Countries like China have begun crackdowns on using digital currencies as a means of payment. And activists have started criticising the industry on its environmental impact from vast electrical consumption.
But it’s not just the falling price of Bitcoin causing problems. The semiconductor shortage has also begun taking its toll on Argo Blockchain’s physical operations. In the latest business update, the management team announced that one of its orders for new mining rigs key to its expansion plans was ultimately cancelled due to production delays. An alternative order has subsequently been placed with a different supplier. But the delivery and installation date for these new machines is expected to be later than originally planned.
How has all of this impacted the business? While Argo Blockchain did mine 166 Bitcoin & equivalents last month (up from 163 in April), revenue for the period fell by 18%, from £6.7m to £5.5m. And with Bitcoin prices continuing to fall so far this month, along with limited additional mining capacity being added, I expect Argo Blockchain’s revenue for June to suffer at similar levels. Needless to say, another double-digit drop in gross income will probably see the ARB share price fall further. At least, that’s what I think.
Reasons to be optimistic
The environmental impact of the cryptocurrency mining industry is something that has begun to garner headlines. But encouragingly, Argo Blockchain appears to be one of the few businesses in the sector actively seeking to reduce its carbon footprint. In fact, the company, along with DMG Blockchain Solutions, helped pioneer the Crypto Climate Accord under which signatories aim to reduce their emissions to net-zero by 2030.
What’s more, the management team has just signed a Grid Interconnection Agreement with Wind Energy Transmission Texas (WETT). Under this deal, Argo Blockchain can access an additional 200MW of renewable electricity for its mining operations in Texas. Meanwhile, the two latest data centres to be added to its portfolio are also both powered by nearby hydro-plants.
Over the long term, the reduced environmental impact may help accelerate the adoption of Bitcoin and other cryptocurrencies. This, in turn, would likely help elevate prices once again, taking the business’s profits and the ARB share price with it.
The bottom line
Personally, I remain pretty sceptical. The increased regulatory pressure is proving to be a significant hurdle. One that Bitcoin, and subsequently Argo Blockchain, may struggle to overcome. To date, 21 countries, including China, Russia and Canada, have either banned or limited the use of these currencies to complete transactions. And as more countries join the list, the ARB share price may indirectly suffer as a result.
Overall, it seems the fate of the business remains largely out of the management team’s control. That’s not a trait I like to see when making an investment decision. Therefore, even if the recent decline in the ARB share price presents a buying opportunity, it’s not one I’m personally interested in.