The Argo Blockchain (LSE: ARB) share price soared in 2021. But since then, it’s fallen hard.
As I write, the stock has lost a huge 95% of its peak value. After a 12% fall Tuesday, the shares traded at 13.9p. Back at their height, investors were paying 340p for them, Ouch!
Gains in 2023
Argo has regained a bit of lost ground of late. In fact, it’s doubled so far in 2023. So maybe this latest fall is just a bit of profit-taking.
The year’s gains could be down to a few things.
Argo’s outlook might be stronger now. Many times, I’ve seen a bubble stock soar, then crash, and then settle down into a new long-term growth phase.
Or it could be a dead cat bounce. I’ve seen plenty of those too.
Bitcoin moves
Argo Block chain is a cryptocurrency miner. And after being the latest hot thing a couple of years ago, they’ve gone out of fashion.
But profit doesn’t care about investor sentiment. No, the Bitcoin share price should be a lot more important for Argo Blockchain.
It’s volatile, but it’s rising again in 2023. As I write, the virtual money is changing hands at $29,809 per coin. That’s 80% more than at the end of 2022.
So that does seem to explain the Argo Blockchain share price rise in 2023. It goes hand in hand with crypto prices themselves.
Stock valuation
At the end of Q1, Argo had $14.2m in cash on its books. It also had 85 Bitcoin (or equivalent), worth £2.5m.
Revenue came in at $11.4m in the quarter. But we saw a bottom line reported loss of $8.7m, with adjusted earnings put at a positive $1.6m. Does that justify a market cap of £66m?
You know, I think it might do. At least, we’re well past the days when the company was priced at a huge multiple of its balance sheet value.
But before we get too excited by the gains of 2023, there is a caution.
Bitcoin halving
The next Bitcoin halving is due in April or May 2024. When that happens, miners get just half the previous number of coins per block mined.
Ahead of a halving, coins tend to rise in price, just like this year. So maybe that’s all that’s happened.
Right now, you get 6.25 coins per block. And after the halving, it will drop to 3.125. Eventually, it’ll cost more to mine it than you get.
Crypto miners can carry on mining different currencies. But that depends on enough new cryptos coming in to make up for all the ones halving or otherwise reducing their rewards.
Long-term future?
And that just doesn’t look like a sustainable long-term business to me. I only want to buy shares in companies I expect to still be going, largely unchanged, in another 20 years.
By then, cryptocurrency might have entered investing folklore along with tulip bulbs and the South Seas.
I do, though, think Argo Blockchain could be in for further short-term gains for those who like a gamble.
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.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
