The Argo Blockchain (LSE: ARB) share price has crashed in early deals this morning. At the time of writing, the stock is off around 13%.
Unfortunately, this means that since reaching its all-time high of 284p in the middle of February, the Argo Blockchain share price has lost 55% of its value.
However, to put this into perspective, over the past 12 months, the stock is still up 2,550%.
It seems that shares in the company are falling today after Elon Musk announced Tesla would no longer accept Bitcoin as payment for its vehicles. This has sparked a dramatic sell-off across the cryptocurrency market. Over the past five days, the price of Bitcoin has slumped more than 15%.
As a cryptocurrency miner, this decline will have a significant impact on Argo Blockchain’s revenues.
Revenues may decline
As the Bitcoin price charged to an all-time high in April, the company reaped the benefits. According to its April mining update, the firm reported that it had mined 163 Bitcoin or Bitcoin equivalent (BTC) over the month compared with 165 BTC in March. As a result, it reported revenues of £6.7m in April compared to £6.6m in March on higher mining output and prices.
The company has been investing in its mining capacity to increase output. For example, today, the firm announced it had completed the acquisition of two data centres in Quebec, Canada, which already house a significant proportion of the group’s cryptocurrency mining equipment. The facilities are also almost entirely powered by hydroelectric power.
Argo’s shift to renewable energy comes at a delicate time for the crypto industry. Indeed, Musk cited Bitcoin’s high energy consumption as one reason why Tesla would stop accepting it as payment for vehicles.
In the past, I warned that the elevated valuation of the Argo Blockchain share price made it hard for me to value the business. It also assumed the group’s high growth rate would continue indefinitely. This was never guaranteed.
Unfortunately, I now think we are seeing what happens when a high-growth business fails to live up to expectations. Investors become spooked and start to sell the stock.
Argo Blockchain share price risks
Due to these risks, the company may not be suitable for all investors. I’m comfortable with the level of risk involved here, but some investors may not be.
However, this does not mean that Argo is necessarily a bad investment. The company’s valuation may continue to fall, but if its fundamentals improve, as they have been doing for the past 12 months, sooner or later, the market should recognise the value.
As such, my view of the enterprise has not changed. I still think Argo has potential and would buy a small number of shares as a result. Nevertheless, as the market continues to re-evaluate the business, I reckon the Argo Blockchain share price may continue to fall in the near term.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. 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.