At first glance, cannabis and cryptocurrencies seem to have a lot in common.
Both are part of highly speculative markets subject to exuberant highs—and crushing lows. The legality and regulation of each languishes in a gray area. And with many investors, both assets have failed to completely shake their perception of being aligned with black market activity.
Yet according to Rob Wertheimer, founding partner of Melius Research, a clear dividing line separates the two.
“With cannabis, you know there’s a market,” Wertheimer said during an interview on Yahoo Finance’s Business of Cannabis special. “You just have to convert it to legal, right? And so there’s a much stronger foundation.”
Within the nascent cannabis industry, demand for its products is well-documented. In the U.S. — the global demand leader for cannabis — total legal demand is expected reach $25.7 billion by 2025, up from $10.3 billion in 2018, according to a report from analytics firm New Frontier Data.
Analysts from Wall Street firm Cowen have envisioned four key verticals for cannabis: Adult use, beauty and nutraceuticals, over the counter pain and sleep, and pharmaceuticals. Each segment carries major market promises, analysts say.
“The consumer branding potential is very, very large,” Wertheimer said. “It fits very naturally in a consumer staples space, and so people understand that.”
Full adult use legalization in Canada has already unlocked significant value for cannabis companies, which have expanded their product mixes to cater to a recreational consumer.
Also, major public cannabis companies including Tilray (TLRY), Canopy Growth Corporation (CGC) and Cronos (CRON) saw triple digit revenue increases over last year, in the wake of adult use legalization.
‘Booming market of low prices’
But the analogy between cannabis and cryptocurrencies deepens when considering the economics. Both are commodities with indefinite ceilings on supply.
Namely, naysayers have pointed to…