SMALL CAP IDEA: Argo Blockchain seizes the second as Bitcoin soars

Few would have anticipated it, however bitcoin is again in enterprise.

The granddaddy of cryptocurrencies regarded near sure demise this time final 12 months following a bevy of scandals that shocked probably the most speculative of asset courses into submission all through 2022.

But quite a few collapsed Ponzi schemes (see Celsius; Terraform Labs) and one high-profile fraud conviction (see FTX founder Sam Bankman-Fried) later, and bitcoin has reemerged because the watercooler asset class of the day.

Bitcoin’s fame was additional bolstered by final week’s landmark approval of spot-bitcoin exchange-traded funds within the US, setting the stage for a tsunami of institutional cash into the market.

Bitcoin’s fame was additional bolstered by final week’s landmark approval of spot-bitcoin exchange-traded funds within the US, setting the stage for a tsunami of institutional cash into the market

Following the regulatory nod, main property managers together with BlackRock, Grayscale and Cathie Wood’s Ark Invest enterprise pressed the on-switch on the ETFs, thus bringing bitcoin instantly onto the US inventory market (by an ETF wrapper, anyway) for the primary time in historical past.

Trading volumes throughout all 11 newly minted bitcoin ETFs neared $5 billion within the first day, and Grayscale’s GBTC fund broke the all-time ETF debut report by clocking $2.3 billion in volumes alone.

Surprisingly for some, bitcoin did not see a concurrent rally, although this was primarily because of it already clocking in 170% value of year-on-year positive aspects prior, resulting in a reasonable ‘sell-the-news’ scenario.

These approvals by the Securities and Exchange Commission (SEC) additionally got here with a warning from chairman Gary Gensler, who stays a permahawk on something even partially associated to crypto property.

‘While we authorized the itemizing and buying and selling of sure spot bitcoin ETP shares as we speak, we didn’t approve or endorse bitcoin,’ he acknowledged.

The approvals ‘ought to under no circumstances sign the Commission’s willingness to approve itemizing requirements for crypto asset securities’, Gensler remarked. ‘Nor does the approval sign something in regards to the Commission’s views as to the standing of different crypto property beneath the federal securities legal guidelines or in regards to the present state of non-compliance of sure crypto asset market individuals with the federal securities legal guidelines.’

Why even approve them, you may ask?

Without entering into the weeds of it, the SEC was kind of strongarmed by the US courts, who referred to as Gensler’s decade-long marketing campaign towards market-traded bitcoin securities ‘arbitrary and capricious’.

Huzzah for US traders not savvy sufficient (or risk-tolerant sufficient) to obtain a crypto pockets and maintain bitcoin free of charge on the blockchain, however what about UK traders?

Unfortunately – and considerably satirically given the UK’s supposedly extra liberal strategy to cryptocurrency than the US – the Financial Conduct Authority maintains a ban on ETFs dealing in ‘unregulated transferable crypto property’.

As Laith Khalaf, head of funding evaluation at AJ Bell, defined: ‘US ETFs usually are not out there on the market within the UK as a result of they do not subject a Key Investor Document, so fund teams would wish to launch funds particularly for the European or UK market.’

The tide could shift because the UK regulators play catch up, leaving few choices for UK traders searching for publicity to the bitcoin markets by conventional finance routes.

Few, however not none.

London-listed bitcoin miner Argo Blockchain Technologies presents an intriguing small-cap, bitcoin-adjacent play.

Bitcoin miners use huge server farms of extremely specialised computer systems to maintain the bitcoin community ticking alongside, receiving bitcoin payouts in return.

The extra a bitcoin miner contributes to the community, the extra bitcoin it receives. This makes bitcoin mining shares a preferred proxy for bitcoin itself.

Indeed, Argo’s share value was up by 170% 12 months on 12 months to 32p earlier this month, reflecting bitcoin’s efficiency virtually to the tee.

Jumping on the chance offered by the rally, Argo executed a £7.8 million fairness spherical at a 24% low cost on 8 January, after which its shares fell again to fifteen.5p as of the fifteenth.

Will Argo shoot up once more if, as many suspect, bitcoin has a bullish 12 months in entrance of it? There’s a superb probability it is going to, although not definitively.

Huge working capital necessities, debt concerns, regulatory uncertainty and even adversarial climate situations all play into Argo’s valuation metrics.

Too tangential for you?

UK traders can faucet right into a bitcoin ETF listed on the Deutsche Börse due to ETC Group’s Physical Bitcoin Fund (BTCE), which the London Stock Exchange simply has made out there by its Turquoise Europe multilateral buying and selling facility.

For all intents and functions, this permits UK traders to spend money on a bodily backed, unleveraged bitcoin ETF regardless of the dearth of home regulatory approval.

All for a price, after all.

Or, you realize, you can simply go old-fashioned and maintain bitcoin instantly on the blockchain. This requires a sprinkling of technical know-how, however you can save hundreds on administration charges within the course of.