Cryptocurrency Vs Marijuana: Where To Invest Your Money?

The global marijuana industry faces challenges such as market volatility, mixed investor sentiment, and a reputation for being a high-risk business. On the other hand, cryptocurrencies are intended for payments and transmitting value across a decentralized network of users. So, which is a better investment?

Well, it depends on your risk appetite and investment goals. Marijuana stocks and ETFs are more common investment options, but cannabis cryptocurrencies have been gaining popularity, especially among crypto enthusiasts looking for opportunities in the cannabis industry.

Cannabis cryptos offer a way to invest in the industry without the typical regulatory hurdles as they are decentralized and not controlled by governments. Popular options include HempCoin, PotCoin, CannabisCoin, and DopeCoin.

Cryptocurrencies, in general, have become increasingly popular, with thousands of options available. The most well-known is Bitcoin, but others like Ethereum, Binance Coin, and Tether are also widely used.

Both marijuana and cryptocurrency investments come with their own set of risks and considerations. It's important to do your research and understand the unique characteristics of each before making any investment decisions.

Marijuana-backed cryptocurrencies

HempCoin (THC) is one of the earliest marijuana-backed cryptocurrencies, launched in 2014. It stands out for its focus on supporting cannabis farmers and creating secure payment relationships between farmers, distributors, and consumers. With a solid community of users and investors, HempCoin has significant growth potential, not only in the marijuana space but also in the agricultural industry.

PotCoin (POT) is another prominent player in the cannabis cryptocurrency space. Introduced in 2014, PotCoin gained popularity in 2021 when former NBA star Dennis Rodman was seen wearing a PotCoin.com shirt. The cryptocurrency is known for helping legal cannabis companies navigate payment issues. While its current value is lower than its all-time high, PotCoin remains a significant player in the industry.

CannabisCoin, launched in 2014, is also among the earliest batch of marijuana cryptos. It is designed specifically for transactions between medical cannabis dispensaries and their customers. One of its unique features is the ability to exchange cryptocurrency directly for cannabis. Additionally, CannabisCoin offers global payment capabilities, allowing token holders to make digital payments worldwide.

DopeCoin (DOPE), created in 2014, provides a digitally secure and instant transaction platform for the marijuana industry. It offers a staking feature with up to 5% annual percentage yield (APY) and decentralized finance (DeFi) capabilities, such as lending and borrowing. DopeCoin has one of the highest market caps in the cannabis payments ecosystem, making it a valuable asset in the industry.

In summary, marijuana-backed cryptocurrencies offer a unique opportunity for investors and businesses in the cannabis industry to circumvent regulatory challenges. These cryptos provide secure and anonymous transactions, enabling seamless exchanges of goods and services. With the potential for massive growth in the US cannabis market, marijuana-backed cryptocurrencies are an exciting prospect for those seeking alternative investment opportunities.

Cannabis ETFs

• Roundhill Cannabis ETF: This ETF has been the best-performing marijuana ETF in terms of one-year performance.
• AdvisorShares Pure US Cannabis ETF: This is the largest marijuana ETF in terms of assets under management. It invests in companies across the entire marijuana industry, including GW Pharmaceuticals, Cronos Group, and Canopy Growth Corporation.
• Amplify Alternative Harvest ETF: The second-biggest cannabis ETF in terms of assets under management. It is globally focused and passively managed against the Prime Alternative Harvest Index, which tracks companies benefiting from marijuana legalization initiatives.
• Amplify U.S. Alternative Harvest ETF: This actively managed ETF invests at least 80% of its assets in companies that derive at least half of their net revenue from the cannabis business in the US.
• AdvisorShares MSOS 2x Daily ETF: The fourth-largest cannabis ETF, which uses leverage to magnify the volatility of its holdings.
• AdvisorShares Pure Cannabis ETF: A globally diversified version of the AdvisorShares Pure US Cannabis ETF that holds stocks from Canada, the UK, and Israel.
• Amplify Seymour Cannabis ETF: This actively managed ETF uses swaps to circumvent restrictions on holding US plant-touching marijuana stocks. It invests in companies across pharma/biotech, cultivation, retail, hemp, and cannabis-infused products, as well as support companies in agricultural tech, real estate, and commercial services.
• Cambria Cannabis ETF: The smallest ETF on this list in terms of assets, with a focus on being a low-cost option among cannabis ETFs that don't use leverage.

While these cannabis ETFs offer a way to invest in the marijuana industry, it is important to note that investing in this sector comes with considerable risk due to regulatory uncertainty, financing hurdles, and unpredictable business models and operations.

Cannabis stocks

Cannabis Industry Overview:

The legal cannabis market is experiencing rapid growth worldwide, with global spending on legal cannabis projected to reach $57 billion in a decade. This growth is driven by the increasing legalization of recreational and medical cannabis and the rising demand for these products. As a result, the cannabis industry is attracting investors seeking opportunities in this evolving sector.

Volatility and Risk Considerations:

It's important to acknowledge that investing in cannabis stocks comes with certain risks and volatility. The regulatory environment surrounding cannabis is still evolving, and there are federal-level restrictions in some countries, such as the United States. This creates challenges for businesses operating in the cannabis industry and can impact the performance of cannabis stocks. Therefore, investors should carefully consider these risks and conduct thorough research before investing.

Popular Cannabis Stocks:

Several publicly traded companies offer investment opportunities in the cannabis sector. Here are some notable examples:

• Canopy Growth Corporation: A well-known player in the cannabis industry, with a presence on the Yahoo Finance watchlist for cannabis stocks.
• Aurora Cannabis Inc.: Another prominent cannabis company that has experienced significant stock movements, such as a 46% surge after the DEA's announcement regarding rescheduling cannabis.
• Vireo Health International, Inc.: A physician-led cannabis company focused on bringing advanced technology, science, and engineering to the industry.
• Fire & Flower Holdings Corp.: A quickly growing cannabis retailer focusing on the Canadian market and expanding internationally.
• Trulieve Cannabis: A cannabis company that saw solid gains, with a market close price of $10.99 and a change of +$1.28 (+13.18%) following Trump's comments supporting cannabis reform.
• Green Thumb Industries: Also experienced notable gains after Trump's announcement, with a market close price of $10.66 and a change of +$1.02 (+10.58%).

Final Thoughts:

Crypto market volatility

The crypto market is highly volatile, and this volatility is a key consideration when weighing up investments in cryptocurrency or marijuana.

Cryptocurrency is a relatively new asset class, and as such, it is widely considered to be volatile. Crypto can experience significant upward and downward movements over short time periods. Bitcoin, the largest cryptocurrency by market cap, is prone to big fluctuations. For example, in December 2021, it fell 20% in a matter of minutes. In the first two weeks of March 2020, it lost 40% of its value.

Short-term volatility in the crypto market is almost unpredictable. It is driven by news and influencer opinion, as well as market manipulation by institutional Bitcoin holders. This makes short-term price predictions very difficult and risky.

However, crypto volatility can be an attractive feature for investors, offering the possibility of high returns. Strategies such as dollar-cost averaging can be used to limit the downside impact of volatility.

The crypto market has historically experienced cycles approximately every four years, with a strong bull market followed by a bear market. Bitcoin halving events, which occur every four years, are thought to trigger these cycles.

Marijuana Market Volatility

The global marijuana industry also faces the challenge of market volatility, along with mixed investor sentiment and a reputation for being a high-risk business. Marijuana is illegal at the federal level in the US, which makes it difficult to conduct financial transactions even in states where it is legal. This has led to the rise of marijuana-specific cryptocurrencies, such as HempCoin, PotCoin, and CannabisCoin, which allow merchants and consumers to complete transactions while avoiding the banking system.

Both the crypto and marijuana markets experience significant volatility. For investors, the key consideration is how to manage this volatility. In the crypto market, short-term volatility is difficult to predict, but there are strategies to manage and even profit from longer-term cycles. In the marijuana industry, cryptocurrencies offer a way to bypass the volatility associated with regulatory issues.

Crypto regulation

The topic of cryptocurrency regulation is a complex and evolving issue that varies across different regions. Here are some key insights and considerations regarding crypto regulation:

Current Regulatory Landscape:

Currently, the United States lacks a federal regulatory framework for digital assets, leading to a lack of uniformity in state-level regulations. Some states have enacted specific laws governing cryptocurrencies and blockchain technology, while others include crypto under existing money transmission statutes. This has resulted in a patchwork of regulations that differ from state to state.

State-by-State Variations:

A closer examination of individual states reveals a diverse range of approaches to crypto regulation:

• Hawaii: Recently enacted favourable crypto regulations, no longer requiring crypto exchanges and firms to obtain a money transmitter license. This has attracted major crypto companies like Coinbase and Metamask to the state.
• Arizona: Has multiple statutes related to blockchain and crypto, including recognising blockchain technology for record-keeping and smart contracts. Arizona also allows state agencies to accept crypto as payment for various obligations.
• California: The Department of Financial Protection and Innovation has not determined if crypto triggers banking or money transmission laws, but the state is considering several bills related to crypto regulation and acceptance as payment.
• Colorado: Requires licensing for crypto-related activities and has passed laws related to blockchain technology adoption in agriculture and state financing.
• Delaware: While crypto may fall under existing money transmission statutes, the state allows corporations to maintain records using blockchain technology and has amended laws to accommodate blockchain usage in statutory trusts and LLCs.
• Florida: Passed legislation defining virtual currency and clarifying licensing requirements for crypto exchanges, with a focus on protecting consumers and promoting innovation.
• Georgia: Considers crypto transactions as money transmission and requires licensing for platforms.
• Idaho: Explicitly states that virtual currency exchangers need an Idaho Money Transmitter license.
• Illinois: Has enacted laws recognising blockchain technology and its validity in commerce, while also establishing initiatives and commissions to promote blockchain and crypto adoption.
• Indiana: Does not require a money transmitter license for fiat or virtual currency exchanges as long as consumers cannot send fiat currency to each other.

Impact on the Cannabis Industry:

The lack of federal decriminalisation of marijuana in the US has created challenges for financial transactions in the cannabis industry, even in states where it is legal. Cryptocurrencies, particularly marijuana-specific cryptos like HempCoin, PotCoin, and CannabisCoin, have emerged as a solution, providing a secure and anonymous means of transacting for businesses and consumers.

Future Outlook:

The future of crypto regulation remains uncertain, with ongoing debates and proposals at both the state and federal levels. As the crypto industry continues to evolve and gain mainstream adoption, regulatory frameworks will likely become more defined and standardised to protect consumers, promote innovation, and address the unique challenges posed by decentralised digital assets.

Frequently asked questions