Argo Blockchain (LSE: ARB) shares are in the limelight again. I’ve written about the cryptocurrency miner a few times but a lot has happened to the shares since my last analysis.
Here I’ll provide an update on the company. I’ll also highlight why I’m still happy to buy Argo Blockchain shares as a speculative purchase in my diversified portfolio.
Latest developments
I should first point out that Argo Blockchain shares are linked to cryptocurrencies, especially the popular one, Bitcoin. So if Bitcoin is performing well then it’s most likely that Argo Blockchain shares will rise. This also works the other way as well. If Bitcoin is falling it’s most likely the shares will tumble.
Recently, Elon Musk purchased $1.5bn of Bitcoin through his car firm, Tesla. This caused the price of the digital currency to spike. But what does this all mean for Argo Blockchain shares?
Initially this is great for the company. It’ll mine more cryptocurrencies, which in turn should increase revenue. But at present, Argo Blockchain is a small loss-making company. Its infrastructure will need to be scaled up to handle large cryptocurrency mining. This means higher costs, which could impact profitability and thereby the share price.
Will others follow?
Let’s be frank, cryptocurrencies are a relatively new technology. But I think that we could be at the start of something here. Now Tesla has purchased a significant portion of Bitcoin, will other firms follow?
I reckon it’ll take some time for wider acceptance of cryptocurrencies. But I think things look promising for digital currencies. Of course, this would be positive news for Argo Blockchain shares, as it would mine more, thereby boosting revenue and profitability.
There are risks
I should stress that the stock isn’t without risk. The UK financial regulator, the Financial Conduct Authority (FCA) has warned against cryptocurrencies. It has stressed that consumers should be prepared to lose all their money if they invest in such digital currencies like Bitcoin.
Cryptocurrencies are extremely volatile, and I’d expect Argo Blockchain shares to exhibit this trait too. This means that I’m only prepared to purchase an amount I can afford to lose.
What’s Argo Blockchain been up to?
The company’s January operational update was positive. According to CEO Peter Wall, the company delivered one of its best months in its history in both mining revenue and profits.
At the beginning of this month, Argo Blockchain announced that it had made an investment in a digital asset company. I like the fact that it’s diversifying its future revenue streams by buying stakes in early stage cryptocurrency firms. This will take time, but as a long-term investor, I think this is great news for Argo Blockchain shares.
Just a few days ago, the company also announced that it had entered into an agreement to acquire land in Texas, US, to build a mining facility in the next 12 months. It’s clearly bullish on the future of cryptocurrencies as it’s accessing a $100m credit facility to fund the project.
While it’s still early days for Argo Blockchain, I think it’s taking the right steps to building its cryptocurrency platform. The stock doesn’t come without risks, which I’ve mentioned above. But as a long-term investor, I’d still buy Argo Blockchain shares in my diversified portfolio.
Nadia Yaqub has no position in any of the shares or cryptocurrencies 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.
