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Argo Blockchain (LSE:ARB) is a cryptocurrency mining company. Much of the success of the business depends on the value of the coins (eg. Bitcoin) in the mineral. With the price of Bitcoin below $20k, some are still optimistic about big gains next year. If that happens, I think here’s where Argo Blockchain shares could go.
Why is the price of Bitcoin important?
As reported in H1 results, Argo issued 939 bitcoins and equivalent coins during the period. Although this increased by 6% last year, the actual financial value of this income was 14% lower. This difference is due to the temporary fall in the price of Bitcoin.
The business has other ways to increase revenue. For example, increasing capacity with the new facility in Texas. But basically, income should always be translated from Bitcoin to US dollars for accounting purposes.
Argo Blockchain’s value to investors depends in part on the company’s financial success. Low earnings and profits are one of the reasons why the stock price has fallen 70 percent in the past year.
Good news for Argo Blockchain shares
At the beginning of May, the price of Bitcoin was last at $40k. Some friends who are very active in the crypto space predict that it will reach that level within the next year. I believe that trying to predict crypto movements is very difficult, so take this with a grain of salt! However, it may happen if we see an improvement in overall risk perception. Alternatively, crypto may benefit from investors looking to diversify their investments away from traditional stocks in general.
Regardless of the reason, I think Argo Blockchain shares could rally strongly if this happens. Apart from the financial benefits, I think the share price will benefit as it is one of the few crypto-related stocks listed publicly in the UK.
For example, an investor may not be comfortable buying crypto directly. Instead, they may feel safer buying listed stocks like Argo Blockchain. Since stock prices correlate with activity in the crypto space, it’s a way to dip a toe in the water. So if the price of Bitcoin starts to rise and returns to all media outlets, the demand for crypto stocks should also increase.
Is it time to get involved?
I think that in the long term, the price of Bitcoin will be higher than it is now. This depends on the size of the projects. As a result, I also think that Argo Blockchain can be profitable in the coming years, thanks to the high coin prices.
The problem I had was that it was already invested in Bitcoin. So buying Argo Blockchain shares will increase my exposure to this sector. It’s like I own gold and then buy gold mining stocks. It doesn’t really make sense. Instead, I use my stock portfolio to extend crypto exposure by investing in companies from unrelated sectors.
Accordingly, if I buy bitcoin and crypto stocks, I should not buy ArgoBlockchain stock.
The content in this article is provided for informational purposes only. It is not, or is not, intended to be any kind of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry a number of risks, including the total loss of any investment. Readers are responsible for performing their own due diligence and obtaining professional advice before making any investment decision.