Argo Blockchain (LSE: ARB) closed Tuesday at 85.9p. Move forward a little, and we were looking at a Thursday close of 115p. That’s a gain of 33% in just three days. As I write on Friday, the price is back a fraction at 113p, but the ARB share price is still up more than 30% since the climb started.
It’s no surprise to see the Bitcoin price is rising this week, and Argo seems to be following it. The world’s best known cryptocurrency is now back above the $30,000 mark, trading at $32,400 by Friday midday. But what’s behind the renewed Bitcoin interest?
Oh, there’s a surprise… it’s Elon Musk again. Speaking at a cryptocurrency conference, the Tesla boss said: “I wanted a little bit more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50%, and that there is a trend towards increasing that number, and if so Tesla would resume accepting Bitcoin.“
So what we have is a 10% gain for Bitcoin, translating to a 30% jump in the ARB share price. That should please one class of investors. You know, the ones always saying that “Bitcoin is too dull and boring for me, Â I want an investment that really has a bit of life in it“. No, I don’t know anyone like that either!
Extreme volatility
This does highlight the extreme potential volatility of an investment in Argo Blockchain. What’s that you say? That was obvious anyway? Well yes, I guess a fall of close to 70% from March’s peak does hint at it. Especially as the stock is still up 3,000% over the past 12 months.
Would I buy ARB shares? You might expect a dismissive ‘no’ from me, but I do see some solid reasons for buying. The key one is the difference between crypto prices and the cost of mining the stuff. As long as Argo Blockchain can keep on creating new coins at a total cost that’s significantly less than the market price, it can make a profit.
To make up some numbers, suppose the Bitcoin price crashes to $20,000 next week, but Argo can mine it for $10,000. That’s still a hefty profit margin. I’d be looking at the miner’s profit margins rather than speculative gains on the stuff itself. Still, if a crash like that did happen, I expect the share price would actually be hammered.
ARB share price ties
The ARB share price is tied very closely to the Bitcoin price. And Bitcoin has been extremely volatile. In the longer term, if and when the use of cryptocurrencies matures, hopefully we’ll see something a bit closer to stability. There are plenty of risks before we get there, mind. But if it happens, I would then consider crypto mining shares as an investment. For now, for me, it remains a spectator sport.
Disclaimer: The content in this article is provided for information purposes only. It is not intended to be, neither does it 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.