The Argo Blockchain (LSE: ARB) share price has crumbled by more than 50% from its all-time high of 284p, printed in the middle of February. However, despite this performance, the stock is still up more than 3,000% over the past 12 months.
Shares in the cryptocurrency miner have been falling even though its underlying fundamental performance has improved. Mining output has increased steadily over the past six months.
In its latest trading update, Argo said it mined 166 Bitcoin or Bitcoin equivalent (BTC) in May, compared to 163 in April. This brought the total amount of BTC mined year-to-date to 716 BTC and the total BTC it holds to 1,108.
Unfortunately, the company has been hurt by the falling Bitcoin price. As a result, despite the increase in mining output for May, revenue was just £5.5m, down from £6.7m in April.
Cryptocurrency prices have been under pressure over the past few weeks following crackdowns in countries like China. In addition, concern about the environmental impacts of mining assets like Bitcoin has also hurt sentiment. And, as the price of Bitcoin has declined, sentiment towards the Argo Blockchain share price has also deteriorated.
Companies like Argo are working towards creating a more environmentally friendly Bitcoin mining network. Last month, Argo and cryptocurrency tech firm DMG Blockchain Solutions signed a “crypto climate accord” to promote industry decarbonisation.
The company has also acquired two data centres in Quebec, Canada, powered almost entirely by hydroelectricity. This should lower its carbon footprint.
These initiatives should help reduce the overall carbon impact of Bitcoin mining on the environment. However, it’s impossible to say whether these initiatives alone will reverse the declines in the cryptocurrency price.
Argo Blockchain share price outlook
Since the end of May, the price of Bitcoin has only continued to fall. Unfortunately, this suggests Argo’s revenue may disappoint once again in June.
This implies the Argo Blockchain share price may continue to fall. Despite the company’s higher BTC output, the lower selling cost will mean the corporation will earn less for each coin produced. At the same time, the group is having issues expanding its output.
Production delays have impacted its purchase of mining machines. This has held back the firm’s expansion plans. The new machines are expected to be delivered later than the original order for between September and October.
Having said all of the above, if BTC prices suddenly spike higher, the company’s fortunes could change dramatically. This would have a substantial positive impact on the business and its prospects. Not only would revenues increase, but the value of the BTC on Argo’s balance sheet would also rise.
This double tailwind would likely lead to a positive outcome for the Argo Blockchain share price.
Still, with so much uncertainty hanging over its share price, I think it could continue to fall. As such, I wouldn’t buy the stock for my portfolio today. I believe other small-cap stocks on the market offer the potential for higher rewards with a lower level of risk.
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Rupert Hargreaves 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.