Having tripled over the previous three months, the price of Bitcoin now rests at a staggering £30,000. Fuelled by investor speculation and the infamous fear of missing out, the virtual currency’s valuation has rocketed to the delight of crypto investors around the world.
Mirroring Bitcoin’s astronomical rise over recent weeks, the Argo Blockchain (LSE: ARB) share price has benefited from a similar phenomenon. The UK-based cryptocurrency miner has watched its valuation rocket 1,200% in just one month. As a result, the shares now trade at around 120p.
With this in mind, could Argo shares be a wise investment for those looking to profit from the latest Bitcoin price boom?
What is Argo Blockchain?
Headquartered in London, the company’s mining infrastructure is located at multiple sites throughout North America. At the time of writing, the cryptocurrency miner operates around 18,000 mining machines.
According to Argo, the company’s mining facilities are state-of-the-art, and custom-built to ensure energy-efficient cryptocurrency mining. In simple terms, the firm’s computers find solutions to complex algorithms. Subsequently, an award in Bitcoins awaits.
Interestingly, Argo Blockchain is the only company of its type listed on the London Stock Exchange. As such, this gives it a significant advantage over its peers. With that in mind, Argo appears well positioned as the market leader in the cryptocurrency mining world.
What’s more, full-year results released in mid-2020 outlined the exceptional performance throughout 2019. To illustrate, Argo witnessed an 11-fold increase in revenue from $948,000 to $10.7 million.
Furthermore, it released an operational update earlier in the week. Within the document, the company reported mining revenue of £1.63m in December 2020, up from £1.48m in November. In addition, company CEO Peter Wall outlined his optimism moving into 2021.
A word of caution on a rocketing valuation
While it’s difficult to dismiss the revolutionary potential of Blockchain technology over the coming years, there are several factors that concern me when it comes to investing in companies like Argo Blockchain.
For a start, given the company’s fortunes are inextricably linked to the performance of Bitcoin, investors can expect a volatile ride with frequent peaks and troughs. That’s if past experience is anything to go by.
After all, the price of Bitcoin is determined largely by sheer investor speculation, which accounts for one of the reasons why we witnessed a harsh price crash back in early 2018.
All things considered, I certainly wouldn’t rule out the possibility of a similarly rapid price crash in the near future. In which case, I’d expect Argo Blockchain’s share price to suffer a similar fate as the assets on its balance sheet tumble in value.
With significant risks ahead, I’m staying away from Argo shares for now, especially given their current valuation. That said, for those who remain bullish about the long-term prospects for Bitcoin and its accompanying blockchain technology, I’d still keep a close eye on the company’s share price throughout 2021.
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Matthew Dumigan 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.