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Penny stocks are notoriously volatile, and perhaps none more so than companies involved in cryptocurrency mining. London Stock Exchange-listed company Argo Blockchain (LSE: ARB) is a prime example.
The share price has more than doubled since early January, reaching 15 pence today. However, that’s still a massive 80% drop from where penny stocks were trading a year ago.
So should you invest in this Bitcoin mining stock today? Here is my opinion.
Bitcoin Price Recovery
The Argo Blockchain share price is linked to the Bitcoin price. In that context, the most important factor behind the company’s positive start to the year is the recovery of the crypto market, led by a 48% Bitcoin price rebound relative to the value of the British pound in 2023.
The return to an ‘active risk’ environment in the crypto markets is good news for the company. Several analysts are bullish on Bitcoin’s prospects as the digital currency approaches its next halving event in 2024. Historically, halving events have been bullish for the Bitcoin price.
Bitcoin is an extremely volatile asset. This translates to similar volatility for Argo Blockchain shares. When times are good, this can result in huge gains, but when times are tough, the losses can be just as big. In my opinion, it is a very high risk/reward stock.
positive momentum
In a recent encouraging development, the company regained its nasdaq list. To maintain its spot on the tech-heavy stock index, closing bids for the company’s US deposit shares must stay above $1 for 30 days.
After the brutal crypto winter of last year, Argo Blockchain failed to meet this requirement. However, it regained compliance in January. This is important for the company’s reputation and to maintain exposure to institutional investors.
In addition, I also like the long-term spirit. The company aims to support blockchain adoption and verification with 100% renewable energy sources by 2025. As the environmental impact of Bitcoin mining is a major drawback for investing in the industry, I am pleased to see the commitment of Argo Blockchain to improve your ESG risk rating. .
challenges
I am well aware that there are considerable risks that these penny stocks face. The collapse of the FTX cryptocurrency exchange last year is a testament to just how feverish the sector can be. In fact, Argo Blockchain narrowly avoided bankruptcy in December by selling its Helios mining facility to digital galaxy holdings for £54 million.
Additionally, the firm currently lacks clear leadership following the recent resignation of founder and CEO Peter Wall. His departure comes at a bad time considering that the US financial authorities are taking aggressive regulatory action on the crypto market. As the access roads to the country’s banking system are closed, some fear that the entire industry could be threatened.
Should I buy Argo Blockchain shares?
Argo Blockchain shares offer the potential for massive profits. His impressive performance this year to date proves it. The other side of the coin is the possibility of huge losses, or even bankruptcy.
In general, I view this penny stock as a very speculative investment. Currently, I am looking for lower risk stock market opportunities, so I will not be buying Argo Blockchain shares today.
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 carry several risks, including the complete loss of the money invested. Readers are responsible for carrying out their own due diligence and obtaining professional advice before making any investment decisions.
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