At first glance, cannabis and cryptocurrencies
seem to have a
lot in common.
Both are part of highly speculative markets
subject to exuberant highsâand crushing lows. The legality and
regulation of each languishes in a gray area. And with many
investors, both assets have failed to completely shake their
perception of being aligned with black market activity.
Yet according to Rob Wertheimer, founding partner
of Melius Research, a clear dividing line separates the two.
âWith cannabis, you know thereâs a market,â
Wertheimer said during an interview on Yahoo Financeâs Business of
Cannabis special. âYou just have to convert it to legal, right? And
so thereâs a much stronger foundation.â
Within the nascent cannabis industry, demand for
its products is well-documented. In the U.S. â the global demand
leader for cannabis â total legal demand is expected reach $25.7
billion by 2025, up from $10.3 billion in 2018, according to
a report from analytics firm
New Frontier Data.
Analysts from Wall Street firm Cowen
four key verticals for cannabis: Adult use, beauty and
nutraceuticals, over the counter pain and sleep, and
pharmaceuticals. Each segment carries major market promises,
âThe consumer branding potential is very, very
large,â Wertheimer said. âIt fits very naturally in a consumer
staples space, and so people understand that.â
Full adult use legalization in Canada has already
unlocked significant value for cannabis companies, which have
expanded their product mixes to cater to a recreational
Also, major public cannabis companies including
Canopy Growth Corporation (CGC)
and Cronos (CRON)
saw triple digit revenue increases over last year, in the wake of
adult use legalization.
But the analogy between cannabis and
cryptocurrencies deepens when considering the economics. Both are
commodities with indefinite ceilings on supply.
Namely, naysayers have pointed to oversupply as
something that undermines pricing power in their respective
Oregon, a mature U.S. legal cannabis market, had
more than 6.5 yearsâ worth of recreational oversupply at the
beginning of this year, as legalization unleashed a production
The result has been a âbooming consumer market of
low prices,â according to a report from the Oregon Liquor Control
Commission, albeit one witnessing âa continued increase in
These are the biggest threats to the cannabis industry:
In a scathing
critique of crypto late last year, UBS pointed out that
for digital currencies, âsupply can go up. It cannot go down.
Demand for cryptocurrencies can go down,â wrote analyst
Cannabis and cryptocurrencies investing both
remain polarizing. However, among mainstream investors, the gap
between interest and aversion has narrowed significantly.
Of 392 financial advisors who participated in
Trends in Investing Survey, less than 1% were currently using
or recommending cryptocurrencies in client portfolios.
Yet 25% reported having clients ask about
investing in cryptocurrencies, according to the report conducted in
April by the Journal of Financial
Planning and the FPA Research and Practice Institute.
Meanwhile, 55% of advisors in the survey said their clients had
asked about investing in marijuana stocks.
And with wellness
products comprising a growing segment of
cannabis consumption, some analysts think it could make a
case for itself in biotechnology.
âI think the analogy for cannabis is much more
aptly made with biotech than with tech or crypto,â Cowen managing
director Lisa Thomas told Yahoo Finance.
âWhat you hear consistently is people want to
have standards and norms around product purity, quality, dosing,
safety, all of those things,â she added. âAnd so, you know, the
mantra â if the mantra before with cannabis was âlegalize it,â
perhaps now itâs âregulate it.ââ
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Emily McCormick is a reporter for Yahoo
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