Some analysts suspect that US stocks may follow the recent downward trend of Bitcoin. Cannabis, too, has reportedly been taking a beating.
According to Forbes, the stock market, which has been relatively wild the past few quarters, will see a similar pattern soon.
Researcher Says Stocks Are Headed Where Bitcoin and Cannabis Currently Stand
In a new editorial, Dohmen Capital Research President Bert Dohmen points to the surge in cannabis stocks two years ago.
He also accounts for the massive Bitcoin bull run of the same period.
In his estimation, both assets were victimized by a gold rush mentality focused on heavy speculation.
“There are many obstacles to firms in that business because of the legal status. […] However, in a frenzy, such factors are easily ignored or the mention of these obstacles are even criticized. […] It’s just like bitcoin, which I warned against, but the crypto bulls are still waiting for it to go to $100,000. Instead, bitcoin may be on its way to eventual oblivion. I pointed out a few simple facts about speculating in bitcoin: you exchange good U.S. dollars, which can buy you anything you want, for a computer entry, which is very difficult, if not impossible, to spend.”
Bitcoin and cannabis may have similar market patterns, but they are affected by very different factors.
Bitcoin Is Not Cannabis
In the case of cannabis, a huge surge in supply brought on by widespread legalization has lead to a reduction in the crop’s value.
Bitcoin theoretically rises indefinitely for the opposite reason: the supply of available new BTC every day will reduce over time, increasing the value of each coin.
If the cannabis industry is going through ups and downs, it will see another up when the federal government finally capitulates to the demands of a now-majority of US states which have legalized marijuana in some way.
More states are on the way.
The next step will be action at the federal level. Then interstate commerce, as well as a new national industry, become possible.
Bitcoin’s regulatory outlook plays less of a role in the market speculation on it, at least in a negative way. Good analysis points out that a restrictive environment likely propels demand for Bitcoin, rather than the opposite. This is to say that the more governments try to “ban” BTC, the more value it attracts.
But Dohmen looks at both assets strictly as instruments on a chart, with little further forward analysis.
It doesn’t take a doctorate in mathematics to understand why cannabis stocks dropped: the nascent industry was in a bubble at the time the researcher references.
Bitcoin, and cryptocurrencies generally, are in a phase of massive upheaval. The godfather token is pushing towards “second layer” scaling efforts, which means that it will increasingly support sidechains and tokens.
This means that Bitcoin will now enter a phase of attempting to compete with Ethereum, Tron, EOS, NEO, and more for dominance in the decentralized application market.
Perhaps the irony of that situation is that when or if Bitcoin makes any traction with dApps, the notion that blockchain technology can’t be used beyond finance will be shattered, splashing egg on the face of the cryptocurrency’s biggest fans.
People like Jimmy Song have long denigrated platforms such as Ethereum, claiming there is no use for blockchain beyond the transfer and store of value.
But new innovations like Liquid Network will make it possible for dApp developers to more easily build on Song’s beloved Bitcoin, perhaps casting shade on his thinking.