Argo Blockchain (LSE: ARG) was last week’s most popular buy on online platform Hargreaves Lansdown, pushing electric vehicle maker Tesla and tech-focused FTSE 100 member Scottish Mortgage Investment Trust into second and third spot respectively.
Based on recent share price gains, I can’t blame investors for getting excited.
Argo Blockchain shares: retirement-maker
Argo’s share price was just over 10p one month ago. When the market closed last Friday, it was 117.5p. A few days earlier in the week, it was as high as 135p a pop. I don’t think it’s a stretch to say that at least some of those holding the stock prior to December might now be contemplating taking retirement earlier than they originally planned.
The huge rise in valuation over recent months isn’t hard to fathom. As the only cryptocurrency mining company listed on the LSE, it was perhaps inevitable that the stock would prove popular as Bitcoin hit the headlines again.
If anything, the spectacular performance of Argo Blockchain shares has been overdue. In case you hadn’t noticed, the cryptocurrency was one the best ‘investments’ you could have made when markets crashed back in March 2020. The price of a single coin was around $5,000 back then. It was over $41,000 last Friday, helped by ongoing concerns over the global economy and the prospect of inflation.
But would I buy now?
Since Argo is a listed company and not ‘hackable’ like some digital wallets, I’d be far more likely to buy its shares over Bitcoin. Even so, I’d be cautious about throwing too much cash at the shares right now.
Things could get very volatile over the next few days and weeks as profits are inevitably banked. Indeed, if the Bitcoin price is anything to go by, holders should be ready to endure double-digit percentage gains and falls. Such is the fate of any company whose earnings depend on a speculative asset it has no control over.
It’s particularly worth highlighting that ARB was also the most popular sell by Hargreaves Lansdown clients last week. For me, this suggests your average holder of Argo Blockchain shares isn’t in it for the long term.
This situation isn’t helped by Argo’s ‘free float’ either. This is the percentage of shares that are available to buy and sell on the market. At a little under 74%, this is less than the typical FTSE 100 stock whose free float is usually very close to 100%. The lower the free float, the more likely the price is to rocket and tank thanks to fewer trades made and limited stock available.
No one knows
Of course, no one knows where Bitcoin is going over the next week, let alone the rest of 2021. Its price could double from here or sink to zero. We’ve no idea. The same goes for Argo Blockchain shares.
Traders dreaming of retiring early and possessing the right level of risk tolerance may be fine with this. My concern however, is at least some retail investors haven’t stopped to question their own risk profile and may allow greed to take hold. Herein lies the danger.
Good luck to those considering Argo Blockchain shares and congratulations to those already holding. I’ll stick to high-quality UK stocks that I can hold for years as my strategy for bringing retirement closer. That’s the Foolish way.
Paul Summers 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.