2 min read
Cannabis shares are a temporary hum. Wait! Didn’t they say exactly the same about Bitcoin?
Traditional Wall Street and media gatekeepers are late.
The fact is that Bitcoin lacks a time-tested business model and fundamental backing, and it pays no dividend. The other fact, marijuana is illegal in almost every country, putting the business model in jeopardy.
Pot stocks are more tangible speculative investments, traded and regulated on recognized stock exchanges, but still subject to a variety of market and regulatory risks. We know that advisors can caution their clients on the risks of investing in cannabis stocks, and the risks are there at current merits. It was the same in the case of Bitcoin.
Cannabis industry offer
But the cannabis industry may offer trace to the future of Bitcoin. Because despite their different paths, the crypto and cannabis are siblings. Why? Just spend a few minutes on Reddit pages committed to trading, Bitcoin and cannabis and you will see similarities of the group. According to TD Ameritrade Inc., trading in pot stocks is superiorly done by millennial-aged males. The stats for crypto look the same.
We are witnessing an explosion of interest in cryptocurrencies, cannabis stocks, and ETFs. And particularly from millennials. What do younger clients need? They love technology. They want to be educated investors, that’s why they are in need of education. They’re younger in their investing and trading careers. But they know what they want. They want to trade 100 shares of stocks at the table in the restaurant using some bot. They don’t want to miss the boat.
So, what is better investment, cannabis or Bitcoin?
If you’re a long-term investor type who’s not at all interested in trading, then you’re on the right track to becoming a wealthy investor over the long term. Sticking with such a reasonable investment strategy can be tough, however, especially if you constantly hear about how a friend of a friend of yours got rich overnight by investing in Bitcoin or Canopy Growth (TSX:WEED) (NYSE:CGC) stock.
You can ignore the hype, as it has nothing to do with you. It’s difficult to tell the difference between a bubble and an actual paradigm shift that could lead to massive riches over the near term.
Today, cannabis stocks and Bitcoin are the two “sexiest” plays.
While the word “bubble” has been thrown by some experts, other equally qualified, are on the other side and are thinking “opportunity of a lifetime.” Being on the right side isn’t a matter of how clever you are. You can find a lot of examples of how some very smart guy has fallen as a victim in the wrong side of the “sexy play” of his time.
Nobody really knows
When it comes to subjects like the rapidly emerging rising cannabis market or blockchain based cryptocurrencies, it’s hard to know what you’re dealing with as an investor. Nobody really knows how such new entities will act in the public markets over a long period. Attempts to make comparisons to events that happened in the past can make some sense but can’t help a lot.
Neither cryptocurrencies nor cannabis are suitable for conservative investors. It is for visionaries, for those who can perceive the future and recognize the chances. Set a limit and stay within it.
There are many people in the crypto industry believing in a bright future. As well as there are supporters of legalization of cannabis. Technology companies like SinglePoint and POSaBIT are working to generate a payment method for dispensaries and consumers using bitcoin. In recent years, some cryptocurrencies have cropped up specifically for cannabis transactions, like PotCoin and HempCoin.
This isn’t the first time that stocks in a particularly hot niche have soared. It was less than a year ago that bitcoin stocks were all the rage, with those companies specializing in the cryptocurrency space seeing explosive gains. Many people never bother to look back at overhyped areas once they fall out of fashion, but investors who put their hard-earned money into popular stocks often learn the hard way what can happen.
Right now, a limited number of marijuana stocks is available to most investors. We’ve seen some massive moves in marijuana stocks. Those gains stem from the fact that investors who want to invest in marijuana have limited options available to them.
That was the case with many Bitcoin stocks.
In 2017, the top-performing Bitcoin stocks were typically among the least liquid. That reversed itself in 2018 when Bitcoin experienced a distinct decline in its volatility.
There will be winners, but not necessarily where you expect. Perhaps the most important lesson cannabis investors can learn from the Bitcoin boom and bust is that success can come in unexpected places. As an investor, you have to be ready to look for secondary effects and how they can benefit companies that might not always seem related.
Investors want to get rich from cannabis stocks, but past investing crazes and experience with cryptos have often left people wishing they hadn’t fallen for the allure of this markets. You can avoid repeating those mistakes and improve your chances of being successful with your investments in the long run. Just get educated, learn permanent, test and measure everything twice.
Waste your time. Not your money.
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