Argo Blockchain (LON: ARB) shares are up 19% today. ARB shares have risen on the back of the Bitcoin (BTC) price rise. Obviously, and clearly, if the price of something being mined rises – whether it be lithium, gold or Bitcoin – then the prices of the people who mine it will benefit. But the thing to really grasp is that the miners’ price is leveraged to that commodity price. For the costs of production do not change when the market price of what is produced does. So, the change in price feeds through directly to the bottom line. It’s not revenues that change by the price difference, it’s profits that do.
Now we’ve not been all that onside about Argo Blockchain: “ Now we, just because we think this way, think that BTC is not going to rise substantially again. We think the game’s up given that SEC action on so much of crypto. OK, we could be wrong on that but it does inform the next point. Which is that Argo Blockchain is something to trade, it’s a leveraged option on the Bitcoin price. Play with it that way, if at all.” Agreed, we could be wrong on that but that is our view. Even when they get paid not to mine bitcoin at Argo: “Argo Blockchain (LON: ARB) (NASDAQ: ARKB) gets paid by Texas for the process of *not* mining Bitcoin. Now this is nice enough for Argo of course, but it does show up the absurdity of how the bureaucracy manages the energy system. The reliance upon renewables – or unreliables – is such that Texas cannot guarantee that all users of electricity can have electricity when they want it. So, contracts have to be made with those who are willing to forgo it at times – and they have to then get compensated.”
Argo Blockchain share price from Google Finance
This effect is not limited to Argo of course. We’ve also seen it just today in Riot Platforms and also Marathon Digital: ““Marathon Digital is a bitcoin miner, the bitcoin price is down, so therefore so are MARA revenues and as costs haven’t declined in line then so too are likely gross margins and then net earnings. This is amplified by Marathon having a substantial stock of BTC that it has mined – that asset has also therefore decline in value. The balance sheet takes a hit as well as the P&L.”” Reverse that, given that BTC has risen, and we’ve got what has been happening to the Bitcoin miners today.
Which does give us an interesting insight. Which is that some to many of us do want to trade Bitcoin. OK – but trading the bitcoin miners gives access to exactly that but with extra leverage. And, well, that advantage that no one’s going to come steal your equity shares, something not necessarily true of a crypto holding…..