Argo Blockchain share price is sinking: is it a buy ahead of halving?

Argo Blockchain (LON: ARB) share price continued its downward trend this week even as the crypto industry continued to thrive. The stock slipped to a low of 13.50p in London on Wednesday. It has retreated by more than 62% from its highest point this year.

Bitcoin mining stocks are plunging

Argo Blockchain is not the only Bitcoin mining company that is struggling. Marathon Digital, Riot Platforms, and CleanSpark have all dived by over 40% from their highest level this year.

This price action has deviated from what normally happens. In most cases, Bitcoin mining stocks tend to be better proxies for BTC when it is in a strong uptrend. For example, in 2023 most mining stocks had a strong performance than Bitcoin.

Argo Blockchain’s performance is mostly because of the upcoming Bitcoin halving event, which is scheduled for April. Halving is a process in Bitcoin’s code that reduces the number of daily rewards by half.

Bitcoin mining companies are impacted by this halving substantially since it reduces the number of coins that they mine every day. It also leads to a higher mining difficulty.

Therefore, in this case, the only way that these companies can benefit is by increasing their mining capacity and diversifying their revenue sources.

Other mining companies are doing that. Marathon Digital has launched a Bitcoin layer-2 network as it seeks to grow its ecosystem. Other companies have started mining other cryptocurrencies.

The challenge for Argo Blockchain is that it does not have the mining capacity and the balance sheet to expand its ecosystem. The most recent report showed that the company mined 124 bitcoin in January, a 20% decline from the previous month.

The most recent results revealed that it mined 370 coins in the third quarter while its revenue fell by 17% to $10.4 million. This happened even as the price of Bitcoin remained much higher than in the previous year.

Argo Blockchain also has inadequate cash to fund the expansion that is necessary to compensate for the Bitcoin halving event. It ended the quarter with just $8 million in cash against $70 million in debt.

ARB chart by TradingView

The daily chart shows that the Argo Blockchain stock price peaked at 35.95p in January and has now crashed by over 60%. It has retreated below the important support levels at 20.90p and 19p, the highest swings in February and June last year.

Argo Blockchain share price has crashed below the 50-day and 25-day Exponential Moving Averages (EMA). The two have made a bearish crossover pattern, which is a bearish sign. It is also hovering slightly above the crucial support at $12.78, the lowest point this year.

Therefore, the outlook for the Argo Blockchain stock price is still bearish ahead of halving. This could see it drop below the support at $10 in the coming weeks.