The UK stocks riding the latest bitcoin surge
In the few short weeks of 2021 to date a theme of unconventionality seems to be taking hold in the markets. No sooner had the Reddit-inspired short squeeze briefly added billions to the value of some beaten down US companies, cryptocurrency bitcoin is mounting another charge as it races towards the $50,000 mark.
This is driving up prices of related assets and businesses with two UK-listed firms surging higher. Argo Blockchain (ARB) has moved from 7.6p to 130.5p in the last three months, while recently listed Mode Global (MODE) is up a more modest, though still material, 30% on its October 2020 issue price.
Investors may be wondering how both businesses fit in the cryptocurrency food chain. Argo Blockchain is a cryptocurrency miner. Bitcoin and other cryptocurrencies are digital alternatives to cash and they work on ‘blockchain’ technology.
A block is a piece of computer code that stores the data for a transaction. It is linked to the existing chain of blocks which acts as a ledger, or a record of all transactions.
Mining cryptocurrency means verifying transactions and adding new blocks to a blockchain ledger, a complex process which is rewarded with bitcoin. Argo recently reported mining revenue of £2.48 million for January, up from £1.63 million in December 2020.
The massive increase in its market value likely reflects the limited options in terms of share-based investments for those looking to play the leap in bitcoin.
Mode is a bitcoin banking app. It saw trading volumes surge 1,500% in December. Data on its customer base is illustrative of the demographic driving the bitcoin bounce – 79% are male and 64% are 30 or under.
It also offers a ‘Bitcoin Jar’ product which offers the prospect of interest on holdings of the cryptocurrency.
The latest leg higher for bitcoin follows the news that electric vehicle and technology company Tesla had bought $1.5 billion worth of the cryptocurrency, something Mode did on on a much smaller scale last year when it placed 10% of its cash reserves in bitcoin.
The somewhat speculative nature of the action around bitcoin is revealed in the pace of its recent rise. After breaching $20,000 for the first time in the last days of 2020 it was trading at more than double that amount within a matter of weeks.
And the surging price of joke cryptocurrency Dogecoin – linked to a canine-related viral internet phenomenon from 2013 – is a further indication of a level of frenzy in this space.
Read this article to learn why bitcoin is starting to be taken more seriously by the business and investment community.