After reaching an all-time high of around 284p in the middle of February this year, the Argo Blockchain (LSE: ARB) share price has been on a steady decline.
At the time of writing, the stock is trading at around 128p, down 55% from the all-time high. Still, it’s up nearly 3,300% over the past 12 months.
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After the company’s recent performance, some investors might be wondering if the stock will continue to fall. They may also be wondering if the current downward slide is over.
Both of these questions are difficult to answer. It’s impossible to tell what the future holds for the Argo Blockchain share price. However, we can get some idea of which direction the stock may head by looking at the company’s underlying fundamentals.
In theory, over the long run, a company’s share price should track its fundamental performance. If profits continually increase for 10 years, for example, the stock price should follow suit.
As a crypto miner, Argo’s fundamentals are tied to cryptocurrency prices. As the company specialises in Bitcoin mining, this means the group’s performance is tied to Bitcoin.
Currently, this currency is under a considerable amount of pressure. China has cracked down on its mining, which has slammed the industry.
At the same time, around the rest of the world, cryptocurrency miners face pressure for their large carbon footprint. Regulators are also starting to take more interest. Cryptocurrency exchange Binance is under attack from regulators in the UK, Japan and the Cayman Islands.
These challenges clearly illustrate the risks facing the Argo Blockchain share price right now. All of these headwinds could push users away from Bitcoin, which may send the price lower. If the price continues to fall, Argo’s revenues will decline. If the organisation’s fundamentals deteriorate, the shares could slide further.
On the other hand, if increased attention from regulators and environmental criticism leads to real change in the industry, the perception of cryptocurrencies, including Bitcoin, could shift dramatically.
This would have a significant positive impact on the Argo Blockchain share price. A shift in perception may lead to higher adoption of cryptocurrencies, pushing the Bitcoin price higher. This could enable Argo to generate higher sales and profits.
Argo Blockchain share price outlook
I think cryptocurrencies are here to stay, and additional regulatory oversight could improve the industries reputation. As such, I believe there’s a good case to be made that the outlook for the industry is improving. That said, I’m not in a rush to buy Argo today.
After its recent performance, I think the stock looks expensive. I’d much rather buy other assets in the industry which offer a better risk/reward profile. Indeed, the Argo Blockchain share price isn’t the only company that provides exposure to cryptocurrencies.