Why were Argo Blockchain shares temporarily delisted?

Blockchain stocks are in the grip of a crypto winter, which has seen Argo Blockchain and Core Scientific come perilously close to collapse. Will the crypto industry recover?

– Argo Blockchain shares were briefly suspended in the UK and US, and Core Scientific was on the brink of bankruptcy.

– Despite headwinds, crypto mining hardware is projected to grow at a CAGR of 11.35% over the next five years.

– VanEck Crypto and Blockchain Innovators UCITS ETF has limited exposure to Argo and Core Scientific.

Contagion from the collapse of crypto exchange FTX has continued to spill over into the broader blockchain and crypto industry, dragging down the share prices of Argo Blockchain [ARB.L]Nuclear science [CORZ]Hive Blockchain [HIVE.V] and Marathon Digital [MARA]to mention some.

Argo Blockchain’s shares were briefly delisted from the London Stock Exchange and Nasdaq earlier this month, after the miner accidentally published a test page on its website that suggested the company was close to filing for bankruptcy.

Meanwhile, Core Scientific got a lifeline last week when creditor B. Riley gave the company $72 million. “[B]anchoring is not necessary at all. In our opinion, the vast majority of Core Scientific’s issues are self-inflicted and can be corrected in connection with an open, transparent discussion and ongoing participation with its creditors and shareholders,” wrote Bryant Riley, B. Riley’s chairman, in an open letter.

Core Scientific stock price rose 77.78% during the week ended December 16, although it is down 97.81% year to date. Argo Blockchain stock price fell 62.69% last week and is down 97.44% year to date.

Crypto mining feels pressured

Aside from the negative sentiment stemming from the FTX collapse, mining has been hammered by low crypto prices and skyrocketing energy costs.

In late October, a $27 million fundraiser to ease Argo Blockchain’s liquidity fell through, while the miner has yet to secure a long-term power purchase agreement for its energy. It mined just 198 bitcoin or bitcoin equivalents in November, down from 204 in October.

Argo Blockchain has been downgraded by several analysts in recent weeks, including Jefferies’ Jonathan Petersen, who lowered it from “buy” to “hold,” citing a “perfect storm of headwinds.”

Marathon Digital reported in its November update that operations at the Texas mine had been “adversely impacted by curtailment” due to “spot market pricing of energy driven by weather”.

Hive Blockchain reported that production in November had been hit by “increased market turbulence due to contagion concerns caused by the FTX implosion, rising interest rates and statements from various governments on energy issues”.

Is a return on the cards?

The ongoing challenges facing the crypto industry may well cause some miners to collapse in the coming months. But once the infection has been contained, it should recover.

“The FTX saga is a story as old as the financial markets, and reflects not a failure of the technology, but of the lack of regulation around the ‘trust point’ – wherever money is exchanged for the promise of future returns,” wrote Goldman Sachs’ global head of commodity research , Jeff Currie, and commodities strategist, Daniel Sharp, in the December edition of the company’s regular ‘Top of Mind’ report.

Demand for crypto mining hardware is expected to grow steadily at a CAGR of 11.35% between 2023 and 2027, according to a ResearchandMarkets report, which expects the crypto mining hardware market to be valued at $12.05 billion in five years.

ETFs in focus

Not surprisingly, ETFs in the space currently have minimal exposure to Argo Blockchain and Core Scientific.

VanEck Crypto and Blockchain Innovators UCITS ETF [DAPP] has allocated only 0.16% of its portfolio to Argo Blockchain and 1.06% to Core Scientific as of December 16. Marathon Digital and Hive Blockchain have a weight of 3.86% and 3.82% respectively.

SPDR S&P Kensho New Economies Composite ETF [KOMP] also holds all four, but with very minimal weighting. Hive Blockchain and Marathon Digital have been allocated 0.048% and 0.07% respectively, while Argo Blockchain accounts for less than a hundredth of a percentage point of total assets under management.