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Investment Junction: Turn to Crypto or Cannabis?

It’s a unique case of two industries that are booming at the same time – both the cannabis and the crypto markets have been skyrocketing, which leaves many investors asking that question: in which industry should they invest? After all, the worst feeling for the investor is to put your money in X, only to realise that Y is doing better.

In 2017, the cannabis industry growth was worth about $16 billion. As legalisation of cannabis becomes more widespread globally, that value is expected to grow substantially as the legal barriers slowly come down around the world.  The recent endorsement of the cannabis industry by US President Trump, as well as a Democratic bill proposal to end cannabis prohibition, added a further boost to the industry’s future. Canada is leading the way in global cannabis legalisation, offering full legalisation of marijuana which began on October 17, 2018.  The country already hosts a number of the largest marijuana producers in the world.

Comparing Crypto & Cannabis

Market Cap

Crypto: it’s sitting at a market cap of roughly $211 billion¹, and boasts some high-profile cryptocurrencies, led by Bitcoin and Ethereum, with many, many additional variants.

Cannabis: at a market cap of currently $8.28 billion,is expected to increase significantly to $28.07 by 2024².

Common Ground

Crypto and cannabis, aside from both starting with a C, share more common ground than one might expect. The two industries even interact closely, as the cannabis industry is taking advantage of the crypto industry by creating its own ‘cannabis crypto’ currencies, such as PotCoin (POT), CannabisCoin (CANN), DopeCoin (DOPE) and HempCoin (THC) and CannaCoin (CCN). These were created to make transactions easier in the Cannabis market.

Political Obstacles

In achieving full confirmation from governments around the world, although the semantics are a bit different: Marijuana possession is still a risky proposition in the US, while holding on to crypto coins, less so.  Whether by coincidence or not, both crypto and cannabis are prohibited from being accessed in China.

Volatility

Both crypto and cannabis are highly volatile, due to regulatory uncertainties and the buzz they create within the layman investor community, which can hype up and then deflate businesses.

Investment Potential

Both Crypto and Cannabis have been an attractive investment opportunity for the younger generation, especially the “Millennial” generation.

The Crypto Challenges

Crypto has been around for over a decade, while cannabis has been around for over 100 years – with one big difference: Cannabis has been called toxic, and declared illegal early in the 20th century, a burden which crypto did not carry. Many businesses and financial institutions still view crypto coins and Blockchain technology with suspicion, as they are capable of stripping away many of these institutions core abilities, such as financial transactions.  The general public is still wary of crypto coins, especially when every crypto theft and heist is broadcast all over the Internet as if it’s the main cause of global warming. And while major companies around the world are slowly adapting to crypto coins as a form of payment, mainstream adoption of crypto is some ways off.

The Cannabis Challenges

Cannabis also faces legal challenges; although you might say this is a bit more of a  ‘cut and dry’ challenge: as at the moment, in the US, it is still illegal on a Federal level.  As such, banks or other financial institutions cannot be involved with it. Although, as mentioned above, there will be attempts to release cannabis from criminality status, particularly in light of neighbouring Canada legalising cannabis.  The US is well aware of the potential profit and the potential loss of profit if it remains hesitant, or delays bills regarding legality.   To circumvent payment problems, for instance, cannabis users have turned to crypto and Blockchain technology for the industry’s own crypto tokens.  While this might be a short-term solution for transactions, what’s paramount for potential investors is one word: legality.

Which is the Better Investment?

While both cannabis and crypto are volatile markets. However, while cannabis is more “down to earth” in that more people have a basic understanding of what it is, what it does, and where it comes from, crypto still remains an enigma for the general population. People may know what Bitcoin is, but how many know the difference between Bitcoin and Bitcoin Cash? Or what is Ethereum and its importance?

On the other hand, the cannabis industry is much less abstract than crypto, since it consists of many sectors: dispensaries, agricultural technology, products & extracts (such as Cannabidiol CBD oil), farms and more.  Ultimately, this is what may tip the balance in favour of the cannabis industry as an investment opportunity.

Sources:

  1. https://coinmarketcap.com/ (data taken on 5/11/18)
  2. https://www.marketwatch.com/press-release/data-shows-the-global-medical-cannabis-market-is-set-to-reach-usd-28-billion-by-2024-2018-09-19

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