Cannabis is the new crypto has become a trendy phrase among investors who perceive many similarities between the two sectors, including volatility and regulatory uncertainty.
The phrase was reportedly first used by Bloomberg in an article about the hype around cannabis stocks, which have spiked at significantly higher rates than crypto. The article speaks of “fortunes made and lost on weed in the wildest single day of trading”.
For example, cannabis firm Tilray’s shares nearly doubled in 20 minutes, and references to cannabis in news articles have also nearly doubled the amount mentioning crypto, according to data from Bloomberg sources. Tilray launched an Initial Public Offering (IPO) in June, and since then the price of its stocks have climbed 200%. Canopy Growth (CGC) and Aurora (ACBFF) have also seen a bump since Tilray’s IPO, but have also been erratic on many days.
Shades of crypto
“Amidst the cannabis stock fever, many investors see shades of crypto. It has become a popular sound bite: ‘Cannabis is the new crypto,’”, reads a Yahoo Finance article published 27th September.
This goes on to say that the two industries have a lot in common, including “volatile trading action from day-to-day with wild swings influenced heavily by media coverage; news announcements; millennials’ excitement; regulatory uncertainty, and mainstream firms showing interest”.
Fraud, another common denominator
Owen Donley III, Chief Counsel of the SEC’s Office of Investor Education and Advocacy, found another common denominator between crypto and cannabis firms: fraud.
“Whether you’re talking about news around marijuana or the growth in the digital asset space, fraud will track to both those things,” claims Donely on Yahoo Finance’s Final Round live show. “The fraud we see in the crypto space tracks the fraud we see in any other space.”
“If you look at some of the cryptos, ICOs (initial coin offerings) that are guaranteeing returns, promising no losses, saying they’re going to change the world, with not a lot to back it up, we’re going to be worried,” he adds. “And of course that’s going to be with any industry, including marijuana. The fact that those two things are linked shouldn’t be surprising.”
Marijuana stocks warning
His comments follow an SEC statement warning investors about potential market manipulation of marijuana stocks.
“Scam artists often exploit ‘hot’ industries to trick investors,” the SEC warned on 5th September. “If you are thinking about investing in a marijuana-related company, you should beware of the risks of investment fraud and market manipulation… Fraudsters may try to use media coverage about the legalisation of marijuana to promote an investment scam.”