MBR final low res

CRYPTO & CANNABIS
Malta Business Review
about Bitcoin, the stripper will realize Bitcoin is
peaking when a Wall Street client starts talking
about launching a crypto hedge fund.
The crypto bubble burst, but there are still many
believers, and many players in the industry
are hoping these currencies can get a haircut,
put on a suit, and collect billions of dollars in
Wall Street money. And maybe they will. But
at its core, there’s an inherent contradiction,
because crypto started as a rejection of all
that. Cryptography allows Person A to send
Person B a message without Person C having
any knowledge of what’s going on. Thanks to
Satoshi, now the same can be done for money.
The entire premise was that banks would no
longer be needed to mediate transactions, and
no one would be in a position to say what types
of transactions are allowed. That’s inherently
subversive, and no amount of futures, ETFs, or
“institutional custodial solutions” can alter that
fact.
So now to marijuana, which has always been
associated with counterculture and degeneracy.
There’s no need for a full history lesson here,
but the path to mainstream respectability was
a little bit different. Although activists worked
for years on marijuana legalization, it feels like
a switch was suddenly flipped. One day pot
dealers were being arrested on the street. The
next day a totally different set of dealers got to
list on the Nasdaq. The Tilray board of directors
looks about as counterculture as a branch of Re/
Max agents.
The dark social mood of the post-crisis years
may have helped catalyze the rise of cannabis.
Peter Atwater, president of Financial Insyghts,
which looks at markets through the lens of
bigger societal trends, wrote in an email that
both crypto and cannabis contain simultaneous
elements of “fear and greed” and they’re both
inherently anti-Establishment. Atwater also sent
me a 2013 research report on attitudes about
marijuana from the Socionomics Institute,
a group associated with the controversial
investment theorist Robert Prechter. The report
argues that support for marijuana legalization
has historically risen in America during periods
of social tension. The percentage of people who
say marijuana should be legal has absolutely
soared since the financial crisis.
Just like with crypto, there’s been a party
going on, and the traditional Wall Street and
media gatekeepers are getting in late. David
Greenwald is a former music journalist who’s
now a web developer and cannabis stock
trader in Oregon. He told me via email that he
started learning about marijuana stocks after a
Google search took him to the Reddit pages r/
Weedstocks and r/thecannalysts. On the latter,
people post breakdowns of the business models
and finances of the various publicly traded pot
companies that are as in-depth as many Wall
Street research reports. “There are folks who
have spreadsheets on which producers will have
how many kilograms ready for sale, what their
supply deals are,” writes Greenwald.
Reddit plays an outsize part in both the crypto
and cannabis stories. Part of the reason Bitcoin
split into two currencies last year—Bitcoin and
Bitcoin Cash—was the claim that moderators
on the popular r/Bitcoin page were censoring
certain viewpoints on how Bitcoin should scale.
To people outside the community, that would
seem like the pettiest drama in the world, but
one Bitcoin sect went ahead and made a whole
new currency because of it.
Aaron Lammer happens to host both a podcast
on crypto called Coin Talk and one on marijuana
called Stoner, so I asked him about the overlap
between the two worlds. First, he wanted to
clarify that his podcast is about enjoying weed,
not speculation. That said, he told me in an
online chat he does follow cannabis penny
stocks. It’s a murky world. “I have never seen
a stock that matched a product I have seen for
sale,” he says. “I don’t really understand what
any of the companies do, which makes them
a lot like shitcoins.” “Shitcoins” is the crypto
pejorative for tiny coins nobody will ever use,
but which people like to gamble on.
"Cryptography allows
Person A to send Person
B a message without
Person C having any
knowledge of what’s
going on. Thanks to
Satoshi, now the same
can be done for money
So here you have these two bubbles, with a
lot in common, coming back to back. But why
now? If there were an easy explanation for
why bubbles emerge, anyone could get rich.
But there are some general rules. You need a
fantastic story, which both crypto and cannabis
have. One’s disrupting finance and big tech; the
other’s a gigantic new market rapidly becoming
legal around the world. You also need the supply
of investable assets to be small, so there’s a
huge mismatch between the great story and
what investors can actually buy.
That mismatch between demand and supply for
internet stocks created some pretty hilarious
situations in the late ’90s. So thirsty were people
to buy into anything dot-com adjacent that
shares of K-Tel International Inc. (the maker of
corny retro compilation albums) rose tenfold in
1998 just because the company said it was going
to start selling its CDs online. Eventually there
was a tidal wave of IPOs in 1999. Supply caught
up with demand, and the bubble soon came to
an end. In 2017 the initial coin offeringexplosion
may have helped kill the crypto bubble, when
suddenly there were more coins to buy than
anyone could count. There were also tons of
forks of Bitcoin—basically, new versions—
including Bitcoin Cash, Bitcoin Gold, Bitcoin
Silver, Bitcoin Faith, Bitcoin World, Bitcoin
Private, United Bitcoin, Bitcoin God (seriously),
Lightning Bitcoin, Bitcoin Diamond, and dozens
more.
With cannabis, there are just a handful of
companies available to invest in, especially
if you live in the U.S. If the market stays hot,
though, there’s no doubt we’ll see a wave of
IPOs and secondary offerings and spinouts from
existing companies. Plus, we’ll see opportunistic
pivots—press releases from companies saying,
“Hey! We’re a cannabis company now.” You
almost have to feel sorry for (the former) Long
Island Iced Tea Corp., the beverage company
that bizarrely pivoted to blockchain at the
very peak of the crypto hype last December.
If it had waited only a few months, it could’ve
announced some CBD-infused drink, and that
might have made some business sense.
And then there’s that long dormant urge to
gamble. When I asked Greenwald why he both
invests in and trades cannabis stocks, he was
crystal clear: “The answer is volatility.” The
stocks can go up 10 percent or 20 percent in a
day. Of course, they can crash, too. If you are a
disciplined investor, volatility is a threat, because
it plays with your emotions and tempts you to
make bad decisions. But if you are a trader or
gambler, and you are looking for action, volatility
is an asset. And these days it’s a rather scarce
asset. The years 2017 and 2018 have been
among the least volatile for the market on
record.
Probably the most visible advocate for cannabis,
both as an investment opportunity and for its
medical benefits, has been Todd Harrison of CB1
Capital. Harrison first got interested in the space
after 9/11. He was working at a hedge fund in
the vicinity of the Twin Towers when the attack
happened, and the ensuing period left him with
PTSD. Mainstream therapies weren’t helping. So
he went down the rabbit hole, learning about
the history of the war on marijuana, and what
he says is the government’s long-term effort to
suppress the medical research on it. He points
out the heavy racial component in the war
on drugs. The government has “blood on its
hands,” he told me.
Ultimately, he sees this market going to $2 trillion
to $3 trillion, but says that the current uncertain
legal landscape makes it very hard for most
investment institutions to take advantage of
the opportunity. Cannabis is, he says, “the only
time I’ve ever seen in my 30 years on Wall Street
where individuals can front-run institutions.”
It was at that moment talking to Harrison that
I realized the story with the cannabis boom is
far more gripping than the banal observation
that a new, legal market is opening up. Both
crypto and cannabis have the same meta-story
about getting back at corrupt elites. Stick it to
big businessmen, with their war on hemp. Stick
it to ineffective mainstream medicine. Stick it
to central bankers degrading the value of your
dollars. Stick it to bankers and their bailouts at
taxpayer expense. Stick it to the censors. Stick it
to Richard Nixon. Stick it to Jeff Sessions. Stick it
to the racist prison-industrial complex.
And the cherry on top with both, the believers
will tell you, is that thanks to the current
regulatory black hole, there’s a beautiful
opportunity to get in now and make Wall Street
the last bag holder. Psychologically, at least,
crypto and cannabis are the perfect trades for
the post-crisis era. MBR
Creditline: Bloomberg
www.maltabusinessreview.net
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