Here’s why I’d buy Argo Blockchain shares right now

Argo Blockchain shares have surging in the recent months. I feel the company could benefit from the increasing adoption of cryptocurrencies.

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Diagonal chain made of zeros and ones. Cryptocurrency and mining.

Image source: Getty Images

Since mid-December, Argo Blockchain (LSE: ARB) shares have been on an incredible run. They saw a spike of over 1,000% in just one month. At the same time, Bitcoin’s price has been soaring from around $18,000 in mid-December to its all-time high of over $40,000 on January 9. 

But in my view, the catalyst for the increase in Argo Blockchain share price was not entirely correlated to the surge in the Bitcoin price but more to the broad acceptance of digital assets (including altcoins) into the mainstream. Now, after the recent rally, the question is whether Argo Blockchain is still a good long-term investment for me, or is it currently overvalued?

PayPal adopted Bitcoin and other crypto coins

In March 2020, Bitcoin was trading at around $5,000, and the crypto market momentum was fading. Until October, it was rising modestly, largely due to concerns over the implication of the Covid-19 on the global economy. Then, in October, PayPal announced that customers in the US can buy, sell, and hold four major digital assets. They include Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. In my opinion, PayPal’s adoption of cryptocurrencies was a major factor in the cryptocurrency boom over the last three months. 

So, what’s the connection to the recent spike in Argo Blockchain share price? Very simple. Argo is a blockchain technology company focused on large-scale cryptocurrency mining. This includes Bitcoin, but also any other cryptocurrency that can be mined like Ethereum, Bitcoin Cash, Litecoin, and ZCash. And while bitcoin might be the most valuable cryptocurrency in the market, it’s not necessarily the most profitable to mine. In fact, coins like ZCash, Ethereum, and Litecoin are quite often much more profitable to mine.

In that aspect, Argo’s share price is clearly correlated to the price of Bitcoin. But I reckon it’s more affected by the growing adoption of digital assets. If big players like Amazon ever open up their networks to crypto coins, I believe the Argo share price will keep rising. 

Argo Blockchain share price forecast

It’s a challenge to be decisive when I analyse the situation with Argo Blockchain. Obviously, there’s a risk here. But at the same time, I think there’s potential for a big upside in the upcoming years. That’s particularly so for those who believe the crypto market will perform well and grow, or in the worst case, will stay at the same size. After all, Argo Blockchain is the only public listed crypto mining company in the UK. As such, I see it as the best way for the average investor like me to join the crypto craze. Moreover, Argo reported an increase of 23% in revenues in December and raised its outlook for 2021, which is a good sign for a small company like Argo.

There are widely varying views out there about the future of the cryptocurrency market and in particular Bitcoin. Some say it can soar further while others still believe it’s one big bubble. Nonetheless, Argo’s share price is currently trading nearly 20% below its all-time high and is still, in my opinion, trading at a fairly cheap price. At present, I think Argo is one of the best options for me to get exposure to the crypto market without having to invest in a certain digital coin.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Tom Chen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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