The past few months have seen a huge bounceback across stocks as investors turned optimistic. But there are few that can boast of the extent of increase that Argo Blockchain (LSE: ARB) has seen – its share price has risen by more than 38 times since the stock market rally of November last year.
This is a vertigo-inducing climb indeed, but there seem to be four compelling reasons to still buy the shares now…
#1. Cryptocurrencies’ rising legitimacy
The Bitcoin miner’s share price rally is directly correlated to the value of Bitcoin itself, which has doubled since the start of 2021. While the crypto is a volatile investment, it is gaining increasing legitimacy.
Tesla’s Elon Musk has been making bullish tweets on cryptocurrencies for a while. Investment bank Goldman Sachs has restarted its cryptocurrency desk amid the Bitcoin boom, and JP Morgan is looking to launch a cryptocurrency exposure basket.
#2. Argo Blockchain is expanding fast
With Bitcoin’s growing popularity, Argo Blockchain is expanding too. Last week it completed a £27 million fundraise. It also acquired a 25% stake in a crypto venture capital fund and technology company, Pluto Digital Assets, last month. Additionally, it now intends to build a mining facility in Texas, which has a supportive regulatory environment.
#3. A climate-friendly solution
Argo Blockchain’s move to Texas is also partly driven by the state’s renewable energy solutions at low rates. For those of us keen on clean investments, massive electricity usage required for mining cryptocurrencies is a downer. Much of this comes from polluting sources, making ARB stand out in that regard.
#4. Argo Blockchain shares could benefit from strong performance
Finally, the company just reported an impressive month in Bitcoin mining. Its revenue increased by 75% in February to £4.3 million from the month before, and it reported an average monthly mining margin of 81%.
Risks to ARB
While these positives are impressive, the negatives cannot be ignored either.
The biggest challenge to forecasting the trajectory for Argo Blockchain shares is the regulatory environment. Regulators around the world have expressed their discomfort with cryptocurrencies.
Christine Lagarde, President of the European Central Bank, was quoted on Bitcoin’s role in money laundering in a Financial Times report. Also, the UK’s Financial Conduct Authority has warned that consumers could lose all their money from an investment in cryptocurrencies.
I think the regulatory risk is big in this case. As in other relatively small, but high-growth potential industries, one regulatory change can bring them crashing down. Big names, like the ones mentioned above, can give cryptocurrencies a better chance at survival, but the risk persists nevertheless.
Moreover, the volatile Bitcoin price is a risk in itself as well.
What I would do now
All in all, I think the risks to buying Argo Blockchain shares are too important to ignore. However, I do not want to miss out on ‘the next big thing’ either… In this case, I would only invest as much as I am prepared to lose.
