Bitcoin to $40k? Here’s what could happen to Argo Blockchain shares

Argo Blockchain (LSE:ARB) is a cryptocurrency mining company. Much of the success of the business depends on the value of the coins (eg Bitcoin) which is extracted. With the Bitcoin price below $20k, some are still optimistic about high returns in the next year. If this happens, this is where I think Argo Blockchain stock could go.

Why Bitcoin Price Matters

As highlighted in the H1 results, Argo mined 939 Bitcoins and equivalent coins during the period. Although this was up 6% from the previous year, the actual economic value of these revenues was lower by 14%. This difference was due to the drop in Bitcoin price in the meantime.

The business has other ways of increasing income. For example, increasing capacity with the new plant in Texas. But fundamentally, the revenue will always need to be translated from Bitcoin to US dollars for accounting purposes.

For investors, the value of Argo Blockchain depends in part on the financial success of the company. The lower income and profit is one reason why the share price has fallen 70% in the past year.

Good news for Argo Blockchain shares

The Bitcoin price was last at $40ki in early May. Some friends who are very active in the crypto space estimate that it will reach that level within the next year. I recognize that trying to predict crypto movements is very difficult, so take this with a grain of salt! However, it could happen if we see the general risk sentiment improve. Alternatively, crypto in general could benefit from investors trying to diversify their investments away from just traditional stocks.

Whatever the reason, I think Argo Blockchain shares could also rise sharply if this scenario happened. Apart from the financial benefit it would get, I believe the share price will increase as it is one of the few crypto-related stocks publicly listed in the UK.

For example, an investor may not feel comfortable buying crypto directly. Instead, they may feel safer buying a listed stock like Argo Blockchain. Given that the stock price correlates with the movement of the crypto space, it’s a way to dip a toe in the water. So if the Bitcoin price starts to move higher and it is back in all the media, interest in crypto stocks should also increase.

Time to get involved?

I believe that in the long term the Bitcoin price will be higher than it is now. This is based on how many projects it can be used for. As a result, I also believe that Argo Blockchain will be able to be profitable for years to come, thanks to the higher coin prices.

The problem I have is that I am already invested in Bitcoin. So buying Argo Blockchain shares increases my exposure to this sector. It’s a bit like me owning gold and then buying a gold mining share. It doesn’t really make sense. I would rather use my stock portfolio to diversify away my crypto exposure by investing in companies from unrelated sectors.

On that basis, while I’m bullish on Bitcoin and crypto stocks, I’m not going to buy Argo Blockchain stock.

The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which have several risks, including total loss of invested money. Readers are responsible for performing their own due diligence and for obtaining professional advice before making investment decisions.