At yesterday’s close, the Argo Blockchain (LSE: ARB) share price was down 2% in a day. But that is a minuscule change compared to the sharp fluctuations it has seen during the past year. Between last November and earlier this year, the stock rose by almost 4,000%! It has fallen quite a bit since these highs, but is still up some 1,700% over the past year. And this illustrates the biggest challenge to buying a cryptocurrency-related stock today. In one word, volatility.
Argo Blockchain’s profits explode
But more on that later, let me first get to the good bits. The Argo Blockchain share price has benefited from the company’s performance over the past year. Yesterday, it posted some superb third-quarter results. This miner of bitcoin and other cryptocurrencies reported a record revenue of £19.3m, which takes its revenues for the first nine months of the year to £50.4m. This translates into an increase of 165% in revenues for the first nine months of 2021, compared to the entire 2020. In other words, we should expect the increase to be even higher for the the entire year 2021.
But even more impressive is the earnings increase. The company’s net profits have increased by a whole 1,082% in the first nine months alone from last year. In absolute terms, its earnings also hit a record, of £12.9m.
Progress on mining facility
The company also reported progress on its Texas mining facility, which is expected to enhance the company’s ability to mine cryptocurrencies. Importantly, it is powered by renewable energy, which tackles one of the criticisms levelled against virtual currencies. Crypto mining takes up a lot of energy, and, as we know, a significant part of global energy supply is from polluting sources.
The big issue of legitimacy
It is nice to see that Argo Blockchain is tackling the issues that it can. Because the looming challenge it faces is the extreme uncertainty about the future of virtual currencies, making them volatile in reaction to new developments. And Argo Blockchain cannot do very much about that.
Cryptocurrencies have gained real legitimacy in only one country in the world so far, El Salvador. While that is a positive for this stock, ultimately the country is way too small to make a difference in cryptocurrencies’ broader adoption, in my view. And I need to look no further than China’s clampdown on them to know that. China is the second-largest economy in the world, and when it banned cryptos, their prices were impacted.
What I’d do about Argo Blockchain
Still, I have made a small investment in Argo Blockchain because despite everything, cryptos are growing in popularity. For instance, big investment banks are betting on them and transactions in these currencies are on the rise. As someone with investments focused on the stock markets, I find that the miner is a good proxy for the progress in bitcoin prices.
That said, I think there are still big risks to buying crypto-related financial assets. But I have bought a tiny amount just in case its share price does explode once again like it did last year. I do not wish to buy any more of Argo Blockchain, though, because there a lot of high-quality stocks that are looking promising right now. And their risks are next to nothing compared to the likes of Argo Blockchain.