Financial Market Pundits Predict Cannabis Market to Follow Bitcoin
Will The Cannabis Market Follow Bitcoin?
Speculators are bound to crash markets. Sure, everybody likes money and when you can get it from speculation it is simply too easy to think that you are “just trading” and that no harm can come from that other than financial losses if you invest in the wrong asset, but deep down, we all know speculators crashed Bitcoin this year.
The thing about speculation is that you never actually perceive that you are doing it until the negative results start. Now, it looks like this might be happening in the Cannabis market just as it happened with Bitcoin in the recent past.
On a recent report made by Forbes, comparisons were made between these two markets as the price of Cannabis-related companies is skyrocketing. Tilray INC, from instance, a pharmaceutical company and cannabis producer, reached $200 USD in the stock market last month, which made it more valuable than American Airlines and the broadcast company CBS.
The surge in price and the high volatility of the company are directly linked to the fact that not a lot of people invest in marijuana right now (so there is less liquidity), but also that these companies are very hyped right now, so the speculation process begins.
Similarities And Differences Between The Two Markets
While there are obvious differences, the number of similarities between the markets is uncanny. Both of them are not very mainstream (despite Cannabis being considerably more mainstream than Bitcoin was) and they are rising fast.
In the case of Bitcoin, whose price was raised to almost $20,000 USD in December, what happened soon after was a market crash that wiped out 60% of its value, which was highly inflated due to speculation at the time.
While some people can argue that Bitcoin was unregulated and less popular than Cannabis and that this will happen again, you might remember people saying that Bitcoin would be worth over $100,000 USD at the end of 2018. Yeah, speculation, right?
The truth is that neither market is actually growing so fast because of something tangible and that is at the heard of the whole problem here. Despite all the potential that Bitcoin has, it is, as of now, potential, not something tangible and real. It’s the future.
If you believe in Bitcoin, it can certainly be a good investment, but when the price spikes with no good reason at all except “now everybody knows Bitcoin”, you have to perceive that the speculative traders are at force here. People invested simply because they wanted to get rich like some old-time investors, they did not even know Bitcoin very well at the time.
The same can be said for this industry. A lot of people are investing because there is profit to be had, but this might inflate the price too much and then the bubble will explode. What will happen then? In our case, we had this long bear market which continues to be a bother and the asset lost its real value (trust) after the crash, so if you are investing in Marijuana companies, maybe you should cash out?
However, also be mindful that both industries are very different and that all the legal framework behind the Marijuana industries is considerably more developed than the crypto ones at this point so, while the prices might not be maintained, they might also not crash so hard.