Medical cannabis has seen a rise recently after numerous states within the US and other national governments, have opted in for their use in care-related purposes. The latest entry on this matter comes from Canada, where legalisation has passed through to be adopted as soon as October, bumping the cannabis stocks in the country and boosting the cannabis asset in other markets, including within the crypto one.
“It’s been a blazing-hot few years for Canada’s cannabis industry. Earnings are up, legalization is coming on October, and top cannabis stocks are up as much as 300% over 12 months,” recently mentioned Andrew Button, from The Motley Fool.
“In light of this,” he continued, “it’s no wonder that Canadian cannabis stocks like Canopy Growth(TSX:WEED)(NYSE:CGC), Aurora Cannabis (TSX:ACB), and Aphria (TSX:APH) are riding high. Each of these stocks is up significantly since this time last year. Two of them (Canopy and Aurora) have more than doubled in the past 12 months. All of them have been beating the pants off the TSX average in the past five years.”
In fact, the five-year returns of Canada’s “Big Three” cannabis stocks call to mind another asset class. One that, at first glance, has little in common with cannabis. But when we look more closely, we see that it shares several similarities with Canada’s growing cannabis industry. Yes, we are talking about cryptocurrencies.
According to Andrew Button, “the first similarity between cannabis and cryptocurrency requires no explanation: both have delivered enormous returns over the past five years. Bitcoin is up over 7,000% in the past five years. Smaller cryptocurrencies like Ripple rose upwards of 10,000% in 2017 alone. And cannabis stocks, for their part, are riding high as well. The Big Three Canadian cannabis companies are up more than 1,000% on average, and one in particular (Aurora) is up 21,800% since 2014!”
Another big similarity, mentioned by the expert, between cannabis and crypto is that both have gained from regulatory changes. In the case of cannabis, it’s the coming legalization that will increase the size of the legal cannabis market. In the case of crypto, it was the increasing regulation of the financial markets that led people to look for an unregulated alternative.
At last but not least, there is the cultural factor. Cannabis and cryptocurrency are not mere “industries”; they are global subcultures with devoted, near-fanatical fanbases. Both topics have dozens of subreddits dedicated to discussing them. Both are favourites among journalists and market commentators. And both have customers (in the case of cannabis) and investors (in the case of cryptocurrency) with a level of “brand loyalty” rarely seen elsewhere. This helps explain how both of these asset classes have outperformed the markets by orders of magnitude.
The crypto-market has already seen here the advantage point, and the first to make a movement has been the crypto-exchange eToro, who has just launched a new product, open to a limited amount of investors, and aiming to promote medical uses of marijuana as an investment asset.
The crypto exchange has called it CannabisCare CopyPortfolio and it was limited to a fixed volume of investors, 1,000 at a minimum of $5,000 to start with. Once that figure was reached, the product would be closed again. eToro has said that this is a closed CopyPortfolio, which can be understood as if they were throwing an experiment to see how potential investors could react to this kind of risk investment product.
“The idea planned by eToro was to launch its new product, named The great thing is, we don’t really have to make a decision on this one. Luckily, the rules of portfolio management are in favour of diversification. So we can take advantage of many different trends at the same time. In fact, the more we diversify the better,” as it was seen by Andrew.
Of course, similar to crypto-assets, when there is this type of volatility and short-term gains, it’s probably best to treat these stocks as a high-risk investment and therefore they should probably only be a small part of a well-diversified portfolio. Cannabis might be the next crypto, but playing all-in on it would be as risky as its legalisation.
Hernaldo Turrillo is a freelance journalist working now for IntelligentHQ. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. He was born journalist and became a thinker. Knowledge has no limits.