Trading Argo Blockchain PLC (LON:ARB), the cryptocurrency mining service provider, is not for the faint-hearted, much as cryptocurrencies themselves. The shares had a phenomenal run in January, spiking all the way to 125.5 from 33 on the last trading day in December but have since settled into a lower trading band – if it can be called that – between 68 and 94.
Like other cryptocurrency miners, Argo Blockchain’s share price is largely dependent on the actual value of Bitcoin and the David versus Goliath scenario which is currently playing out on Wall Street in the shape of the GameStop rally and yesterday’s run on silver has also contributed to the already existing popularity of cryptocurrencies.
This is only likely to increase over the coming weeks as the likes of Elon Musk and hedge fund billionaire Ray Dalio show themselves to be in favour of crypto currencies. A single word on twitter from Elon Musk last week, #bitcoin, sent the market soaring up 20%, at least for a period of time.
The number of new subscribers in the cryptocurrency market on Reddit, the platform that was the jumping off point for the GameStop rally, has been increasing by between 20,000 and 30,000 per week bringing the total to above 150,000. Last week alone crypto subreddits have increased by 500% and new traders seem to be positioning themselves to push Bitcoin higher the same way they did with GameStop, aiming to trigger hedge fund shorts’ stop losses.
Expansion plans for Argo Blockchain
Even before the Reddit-related buying started, Argo Blockchain had positioned itself to ride the cryptocurrency rally by building up its mining capacity. The £22.4m raised via a private placement to institutional investors in January, (issuing 28m shares at 80p each), was followed up by bringing 1,295 S19 and S19 Pro miners on-stream late last week. Argo Blockchain added approximately 127 petahash, boosting its existing mining fleet to a total of 772 petahash. This will help it expand output from the 2,465 bitcoin or bitcoin equivalent mined in 2020, which at today’s value are worth close to $60m.
In plain English? Bitcoins can’t be printed but need to be “mined” using powerful computers to solve complicated puzzles. Once the puzzle is solved, which happens every 10 minutes, a new Bitcoin is produced. But as more and more people join the Bitcoin network and try to mine Bitcoins, the puzzles become harder and harder, requiring more computing power and electricity.
The individual sums made during the calculations are called hashes and come in batches of millions. One gigahash is a billion hashes per second, one petahash is a quadrillion hashes per second, and one exahash is one quintillion hashes per second. In 2020, the computers on the Bitcoin network operated at close to 120 exahashes per second.
Argo Blockchain is part of a global race among crypto miners to add capacity to their “mining” operations. For instance the Nasdaq-listed Marathon Patent Group bought 3,304 bitcoin miners for $22 million in 2020, adding 208 petahash per second (PH/s) while Riot Blockchain bought 8,000 miners from Bitmain.
Though Argo Blockchain is not one of the largest miners out there, it is still well positioned to benefit from the next rally in Bitcoin, which seems inevitable, as even mainstream names like Visa get involved in crypto assets. Visa’s chief executive last week called Bitcoin “digital gold” and said the firm plans to add the currency into its payment network.
A word of caution though: that rally will come with much higher daily and weekly fluctuations than almost any other assets.