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Argo Blockchain shares: should I buy?

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Argo Blockchain (LSE:ARB) shares are getting a lot of attention right now. Last week, Argo – which has seen its share price nearly triple in 2021 – was the most purchased stock on Hargreaves Lansdown. 

Should I buy ARB shares for my own portfolio? Let’s take a look at the investment case.

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Argo Blockchain: what’s all the fuss about?

Argo Blockchain is a technology company that is focused on large-scale cryptocurrency mining. For those who don’t know much about crypto-assets, this is essentially the process of using computers to solve complex algorithms and create new coins. 

Headquartered in London, Argo operates a number of strategically-located crypto mining facilities across North America. Its mission is to run an efficient mining infrastructure that supports the continued growth, innovation, and function of the world’s top blockchain networks.

After its recent share price rise, the company now sports a market capitalisation of nearly £350m.

Benefiting from the Bitcoin price

Argo posted a strong trading update last week. This is not so surprising given Bitcoin’s recent strength.

The company advised that during the month of December, it mined 96 Bitcoin or Bitcoin Equivalent (BTC). This took the total amount of BTC mined in 2020 to 2,465.

Based on crypto prices and foreign exchange rates, mining revenue for December was £1.63m, up from £1.48m in November. The average monthly mining margin was approximately 60% for the month, up from 57% in November.

Argo also stated that at the end of 2020, it held 209 BTC in Bitcoin and BTC equivalents, in accordance with its asset management strategy.

The Bitcoin market has entered 2021 on a roll, and we are very optimistic this year will continue to see an increasing mainstream adoption of cryptocurrency. We look to the future with much optimism“, commented Argo’s CEO Peter Wall. 

Looking at these results, the company appears to have momentum right now. 

Argo Blockchain shares: should I buy?

In my view, the investment case for Argo Blockchain shares boils down to one’s long-term view on crypto-assets such as Bitcoin.

If Bitcoin continues to gain acceptance as a legitimate asset (some investors see it as the new gold), and its price keeps rising, Argo Blockchain could do very well. If Bitcoin goes to $200,000, for example, Argo could make a lot of money.

However, if Bitcoin crashes again, like it did in early 2018, Argo could face challenges.

Personally, I’m not so convinced about Bitcoin’s long-term prospects. I am bullish on blockchain technology, in general. I expect to see the world’s central banks roll out digital currencies in the not-too-distant future.

However, I believe that cryptocurrencies such as Bitcoin are simply too volatile to ever be used as real currencies. Bitcoin, for example, was down around 25% yesterday at one point.

Given that Argo’s fortunes are tied to the performance of Bitcoin and other crypto-assets, I think this growth stock is best left alone right now.

In my view, there are much better (and safer) growth stocks to buy.

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Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

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