The direct correlation between the Bitcoin price and Argo Blockchain share price (LSE: ARB) is clear and irrefutable. Last week, Bitcoin crashed. So did Argo Blockchain. As I write, Bitcoin is recovering and guess what? Argo Blockchain is on the up too.
The link is hardly surprising, given that Argo’s corporate mission is to mine the cryptocurrency, and benefit when it rises. I’ve never really understood the point of investing in the stock, rather than simply buying Bitcoin. But people do.
The Argo Blockchain share price rises
Investors will be happy this morning, with the Argo Blockchain share price up 7.14%, at time of writing. That’s on top of yesterday’s 12.71% gain. I could make a fast buck buying this stock. Naturally, I could make fast losses too.
Argo Blockchain started the year trading at 35p. On 17 February, it peaked at 284p. If I had invested £10,000 on 1 January, I’d have had a juicy $91,143.
Argo’s stock has since crashed, for exactly the same reason the Bitcoin price has crashed. Tesla owner Elon Musk called out the crypto as “dirty money”, because Bitcoin miners rely on fossil fuels, and reversed his move to accept it as payment until its green credentials improved.
In a second blow, the Chinese authorities initiated what looks set to be a sustained crackdown on crypto. The Bitcoin price tumbled and, naturally, Argo followed. Despite that, investors have still almost quadrupled their money year-to-date, with the stock trading at 140p. Unless they piled in at the peak, when their stake has dropped by half. Clearly, this is a high risk stock, and will remain so for the foreseeable future.
The Bitcoin price is highly volatile. That’s why traders like it, of course. Sometimes I think it’s only true purpose is to give them something to play with. The same goes with Argo Blockchain. I wouldn’t use it to trade Bitcoin’s volatility though, because the wide bid/offer spread will take regular bites out of any profit you’re lucky enough to make. Right now, investors buy at 145p and sell at 135p, with platform transaction fees on top.
Bitcoin price growth could run dry
The other option is simply to buy and hold for the long term. But that bid/offer spread would hurt even more if I did get lucky and end up making a large sum. Could that happen? The Bitcoin price could go anywhere from here.
Two things scare me. First, it now faces a combined regulatory crackdown, with the People’s Bank of China, US Federal Reserve, and the Bank of England united in talking the Bitcoin price down. Second, I think the Bitcoin price has been driven up by today’s massive fiscal and monetary stimulus. If liquidity dries up, it could crash. As will the Argo Blockchain share price.
At that point, I’d rather be holding shares. In proper companies, with proper business models.
Like this one.
Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…
You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.
And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.
Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.
But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!
Harvey Jones holds a small amount of Bitcoin but 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.