Many investors may be considering whether to buy Argo Blockchain Shares (LON: ARB) after its continued phenomenal rise. In one month alone, buying ARB shares have delivered a return of over 1200%, in the last 5 days, they have delivered a return of over 200%.
So why have investors been piling into Argo Blockchain? Here we look at three key reasons, but first it’s important to understand the concept of cryptocurrency and what Argo Blockchain actually does…
What is Bitcoin and what does Argo Blockchain do?
Bitcoin is a type of cryptocurrency that enables payments to be made through a digital wallet. Transactions are recorded in a ledger known as a blockchain and there are no physical coins in existence. Unlike traditional money supplies, bitcoin is not administered by governments – this comes with benefits such as a decentralised operation and lower transaction fees.
Argo Blockchain is a miner – but instead of mining for a physical asset such as gold, it is mining for cryptocurrency such as bitcoin. Essentially there are a bunch of powerful computers in operation that solve tricky equations and receive bitcoin as a reward.
The mechanics are complex but all investors need to understand is the concept that this is ultimately another form of digital payment.
Three reasons why investors have been buying Argo Blockchain shares
- Institutional investors expect bitcoin to become more accepted globally. Larry Fink, the CEO of the world’s largest asset manager BlackRock has changed his opinion on Bitcoin – in December, he is quoted as saying this could become a truly ‘global market’, suggesting it will become more sophisticated and accepted. BlackRock themselves are looking to focus more on the area as are other large-scale institutional investors.
- The price of Bitcoin is at an all-time high! The price of Bitcoin is now at all time-high, it has climbed from $1 on its debut many years ago to $40,000! It hasn’t always been plain-sailing as in 2017, but the above point shows an expectation that the payment method will start to become normalised. Now, there is no such thing as a passive tracker fund for Bitcoin, so an easy way for investors to gain exposure to the rising price of bitcoin is through a successful mining firm whose success depends on the value of cryptocurrencies…
- Argo Blockchain is mining bitcoins successfully and provides an easy way to join the bitcoin upside. Mining more Bitcoins and the rising price of Bitcoins means success for Argo Blockchain. It has reported serious rises in revenue and margin attributed to the rise of bitcoin. During its last update it noted that it had increased its efficiency in mining which is helping to increase its margins along with the increasing prices of Bitcoin.
Where next for ARB shares?
Stock-markets are at all-time highs, house prices are at all-time highs and bitcoin prices are at all-time highs! Few would have predicted this at the onset of the pandemic. ARB appears to have an efficient and growing mining operation (and a unique proposition on the London markets which drives demand higher), so long as the price of Bitcoin sustains or grows, then investors will continue to be full of hope in the prospects of ARB.
While many will point to the crash of 2017, this time many will argue that it feels a little different with a more digital world becoming ever apparent and the increasing interest from some of the largest investment firms in the world. We also know that there’s some pretty crazy valuations put on anything and everything tech!
The ease of scalability of the business model and wider macro trends mean that we’d expect ARB owners to continue to hold and for newcomers to consider taking a position as part of a diversified portfolio – even with its meteoric rise over the past few weeks.