Member Info for HarChris

AB the point I'm making is i'm sure many of the other miners have sky high AISC but surely none are going to be in such trouble from 12 months of $30k BTC to actually go under? That seems extreme to me. $15k BTC for 12 months? Sure they'll be in a world of trouble, as would Argo but to a lesser extent.

I would assume with the HODL they have all miners will survive the next twelve months unless BTC really throws a wobbly...

'If BTC stays at 30k or less for another 12 months I think we'll see some miners go. Argo to me seems perfectly fine if BTC stays at 30k for a year. If it goes under 15k it would be a panic across the industry.'

Surely you just mean switch off some machines/lay off some staff? I don't see any miners going under if we see $30k for 12 months, I see many machines being switched off though and total hash rate back at about 150EH with Argo mining 900 coins a month.

Starting to think this scenario is better for Argo long term than say 12 months of ~$45k and an explosion in hash rate.

That's not quite correct Kinderkid. What they do is show what they've reduced to below 0.5% and then there's no more reporting after that. Sometimes it might be 0.46% or 0.34% or whatever, this time it shows 0.

Blackrock closed their short completely.

Blackrock Investment Management 0.56% 19th May
Blackrock Investment Management 0% 20th May

What terrible timing!

I didn't defend it or give my view.

Many are questioning it and many more think the whole new world order conspiracy is a load of old b******

It's worth noting for the below to have the biggest effect there needs to have been a longer period between the bull market and the bear cycle, when they are closer together there's far more hash rate ready to come online allowing for difficulty to keep up much more easily with the bitcoin price (think Mara with their 23EH target by early 2023 and Riot with their GW venture in Texas)

The business model itself is not one that facilitates a tech stock valuation - why? Because the price of BTC is counterbalanced with difficulty in such a way that profits are kept in check during upturns and greater rewards to continue mining are offered in downturns. The longer the growth phase the small the marginal gain in profits become as hash rate quickly starts ramping up globally. Growth stocks must have the potential to grow 20% yoy with the potential profits almost unlimited, not reigned in and shared when times are good.

However, difficulty and the price of bitcoin are not perfectly matched, there is a considerable lag so as a trader what you are looking for is to be in when BTC is booming - think September 2020, October 2017 and March 2019. When this happens the price of bitcoin in the short term far outpaces difficulty, (mid Sept 2020 BTC $10.5k, hash rate 135EH, mid April 2021 BTC $63.5k, hash rate 170EH) - it is during these periods that the market gets drunk on the multiples that can be extrapolated from monthly mining figures and market caps get artificially inflated - (Nov 2020, 115 BTC mined, £1.48m rev, margin 57%... April 2021, 163 BTC mined, £6.7m revs, margin 85%).

The above shows monthly gross profit increasing from £844k to £5.7m in just five months, of course that is the sort of growth that more than commands a frothy PE so as long as the cycles play out again in a similar fashion and we see another sharp bitcoin move then once again the share price of any miner that has weathered the preceding storm will catch alight and there will be an opportunity to bank sizeable profits.

It's all about timing.

Predictions for Argo back a year, eighteen months ago are likely to be well off the mark simply for the way in which bitcoin miners are valued now - back then it looked like they were going to be considered high growth tech stocks, forward projections had Argo making £100m a year (still can) with p/e ratios of 20, 30, even 40 and hence 400p a share, 600p, even 800p... but since then the whole business model has been called into question and no longer can they be viewed in that light - barriers to entry are too small, differentiation is almost impossible and simply it's a race for hash power (whilst keeping electricity costs as low as possible and efficiency as high as possible).

Interestingly it's actually a bear market that may create some differentiation - less efficient miners will struggle to keep the lights on let alone grow whilst those that can weather it will also have the opportunity to buy up rigs on the cheap and HODL considerably more as difficulty decreases. Coming out of an extended bear market we're likely to see fewer large NA miners than there were before whilst those that make it through best won't only survive, they will thrive.

Ps Bitcoin back above $30k.

I agree with you on this occasion Pdub, I get the impression alfredh is simply a troll disguising himself as a genuine investor keen for discussion.

I get what you're saying but you chose not to invest in Argo because of a couple of trolls on the LSE bb and a couple of others who can't resist the bait? The investment case should be more important to you than that!

@AIG you might think i'm one of the bulls, I'm not. I moved to about 70% cash just before the war in Ukraine broke out which has served me well and I'm slowly dripping money into stocks I think will multibag coming out of a recession if they are able to whether the intermediary period successfully. I've recently bought into Argo and for me it's much more of a punt than I like but at 51p I'm betting on bitcoin surviving what's to come and going on just one more bull run to multibag from here - it might not happen and I lose the lot but I see this as a good entry and am not desperate to get in much lower - in fact if it goes 35p, 30p I'll probably be no more tempted to go large as it means BTC has dropped to a dangerous price for Argo.

At 51p and $29k we are looking at a BTC price that merely needs to hold til the end of the year for Argo to become highly profitable again.

The HODL mentality played an absolutely essential role in getting bitcoin to where it is today and continues to play a major role. How else do you convince ordinary people to continue to hold as their savings bag and bag and bag again? I have many friends with pretty much every penny to their name in bitcoin, two of them started with £25k each and saw that rise to £275k yet they refused to sell... that £25k is still worth £135k though.

HODL also takes away the most difficult challenge for retail investors, timing one's exit. It's simple - take all your savings, put it in bitcoin, dollar cost average in with what you can afford each month and set your time horizon to 5, 10, 20 years, that's your financial future secured.

I hope it plays out that way for them!

I agree with you that the chances are this goes lower, the chances are there's worse still to come for the stock market but it's worth remembering that almost everyone is thinking this now, that there is widespread agreement about inflation, that the bottom for the nasdaq, the ftse, crypto is still far off - it's often this one-track sort of thinking that causes a surprise...

One surprise month of better than expected inflationary data and markets rebound hard.

'But, what investors need to think about is, is a $20k to $25k cost worth the risk for an asset trading at around $29k, with a likely drop off to <$20k imminent?'

And that's where risk/reward comes into it.

Let's look at two scenarios six months from now - (i) being bearish and (ii) being bullish and compare how Argo might fair vis a vis bitcoin.

(i) Bitcoin is @ $22k, sentiment still incredibly bearish. In this scenario bitcoin has sustained a long drawn out downturn, the interest in crypto & bitcoin mining will have decreased considerably so let's say global hash rate is @ 180EH and some of the less efficient miners are struggling to keep the lights on. Argo is only just profitable at this price and the risks would be obvious (further drops in BTC would leave it unprofitable + no cash to reinvest + no appetite for lenders to lend)

Those investing today in BTC would be 25% down, what would the argo share price be? I think mining 700 coins a month even with the bearish sentiment Argo is still around 50p. Okay maybe it's fallen further, but more than 25%? Share price 35p? Possible but even in this scenario Argo still likely holds up better than bitcoin itself.

(ii) Bitcoin is @ $55k, it's weathered the storm, sentiment has returned to the space and belief in new ATHs has once again returned. Those invested directly in BTC are happy, their $29k buy has appreciated by 90%, what about Argo? In this scenario they arre mining around 415 coins with good margins, does the Argo share price match the 90% (i.e 95p) that bitcoin has appreciated by or do we think it's better or worse? I see £2 a share in this scenario and hence a way, way greater upside (whilst in the bear scenario a similar downside)

Of course one can sit out the space completely but this is just some comparison for investing in bitcoin today vs Argo.

These are some of the scenarios then I see for October 2022 onwards:
Bitcoin stays low, $28k, difficulty doesn't increase, AISC $19k, 670 coins mined a month, $9mx12 = $108m profit before tax
Bitcoin @ $40k, difficulty increases 33%, AISC $25k, 460 coins mined a month, $15m x 12 = $180m profit before tax
Bitcoin @ $55k, difficult increases 40%, AISC $28k, 415 coins mined a month, $27m x 12 = $324m profit before tax

Final possibility generates PBT > today's mcap.

Apologies, I meant the breakeven price will be *below the BTC price as long as Helios Phase 1 is complete as planned and hash rate target is met.

Surely what we can say with some confidence is that the breakeven price will be above the BTC price (unless we see a humongous crash of course). Difficulty is about to be adjusted down this week following the recent fall in bitcoin and I see that continuing if bitcoin fails to retake $30k.

If we see ~$25k BTC for extended 'crypto winter' my take is global has rate moves closer to 175EH with Argo mining 850 a month at 5.5EH

Great, I appreciate that and all your efforts on here - whilst you're right about the £9k figure being extremely misleading you'll also notice that your $34k current AISC figure is being weaponised now - I've seen virtually no mention of the $9k figure recently but the $34k is being repeated numerous times a day by the same poster.

AB, of course there's too many unknowns to predict accurately right now but what would be your best guess if someone put a gun to your head today for what the accounts at the end of the year would show as the AISC breakeven price? I run my own numbers through a few times with my own predictions of what difficulty will be, whether 5.5EH is met etc and came up with $22k, but I lack a lot of the knowledge that you Hexam and others have - be good to hear what number (or range) you come up with.