Crypto Versus Cannabis: What You Need To Consider

Here is a question worth taking a moment to consider.  Which would you rather own: one Bitcoin or 130 shares of Canopy Growth Corp (NYSE: CGC, $50)?  They are both about equal in value based on current prices. But what about next week, next month or as far out as maybe 2020?  

The point of the question is this: when it comes to speculative investing, how much room is there at any one time for two stars? In this case, we are talking crypto and cannabis. We all know how difficult this year has been for crypto. On the other hand the cannabis industry is hotter than ever, with new deals announced almost every day, and merger and acquisition activity at an all-time high.

Just in case you are wondering, the market cap of CGC alone is around $11.4 billion, which would rank fourth in asset value behind Bitcoin, Ether and Ripple.  Collectively, the 10 largest publicly traded cannabis stocks are valued at over $35 billion.

Viridian Capital Advisors estimates that cannabis investments have already surpassed $5 billion this year. There have been over $582 million in Initial Public Offerings and over $8 billion in mergers.  The point here is that cannabis is a headwind that offers a compelling alternative to crypto. Do we need to choose or will there be room for both?

Important Differences

On the surface, there are two fundamental differences between crypto and cannabis: government and mass acceptance.  In the crypto world overwhelming attention is on solving the technical impediments like scaling and security. These are key issues that must be resolved before any coin or token can be expected to serve as a widespread medium of exchange.

Cannabis, of course, suffers none of these limitations.  According to New Frontier Data, sales are expected to surpass $9.5 billion in 2018 — with MJBizDaily forecasting sales of up to $12 billion. If ever there was an understated estimate, this is one of them.

Government Strangulation Versus Acceptance

The United States is one of the biggest markets for crypto and yet regulators have done just about everything possible to drive crypto entrepreneurs to places like Malta, Liechtenstein, Switzerland and elsewhere.  Though the idea of regulators cleaning up numerous scams, security risks and other things is a virtue, the crypto industry’s passion to preserve anonymity has created tension between the two groups.

October 17th, Cannabis Legalization Day

The tipping point for cannabis investors is coming up very soon. October 17, 2018 is the day the government of Canada legalizes cannabis everywhere in the country.  Beyond the obvious, the move opens Canadian banks to do business in cannabis including the processing of credit and debit cards. This is a big deal with implications for U.S. and for crypto as well.

Industry sources suggest that if the U.S. Congress changes control in this November election that either Federal law could be changed or those states with liberal leadership may follow by creating their own cannabis regulations.   

Crypto Needs A Customer

Legal cannabis has pent up demand but what about crypto? As much as we love blockchain technology, it has been a while since the list of merchants accepting Bitcoin has grown significantly.  

Why has so much attention been heaped on Ripple of late? In addition to the news on xRapid, Ripple is disrupting the antiquated and costly SWIFT system of fiat currency exchange where there are billions of wasted time and cost. Little wonder that XRP is challenging ETH for the second spot of crypto rankings.

What To Do Next

With investment returns in conventional stocks limited by record high prices and bonds facing a succession of Federal Reserve induced interest rate increases, the relative value offered by both crypto and cannabis is compelling.  But thanks to favorable developments in the cannabis world, there is now a real horse race underway between the two camps. For what it is worth, it makes sense to own both for long term investors.

Featured image courtesy of Shutterstock. 

Author:
James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.