Bitcoin used to be on every investor’s mind in 2017. Later, in 2018 cannabis stocks gained popularity. Cronos and Canopy Growth were the first two cannabis stocks to list on the New York Stock Exchange. From their listings in March 2019, Cronos had grown by nearly 200% and Canopy had grown over 50%. More and more of these companies have listed themselves on the New York Stock Exchange.
Nothing has soared higher as an asset class than cannabis and cryptocurrency.
Although about half its value was lost in market capitalization, aggregate market capitalization is still more than 2200% higher. This is a return that would require traditional stocks for decades.
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There are many catalysts that support cannabis and cryptocurrency, but much of the success can be attributed to the development of blockchain technology.
Blockchain is a digital, distributed and decentralized register that underlies virtual currencies and is responsible for recording all transactions without the need for a third party, such as banks.
In particular, blockchain is expected to solve a number of problems with today’s payment networks, including long waiting time for processing and settlement, as well as high transaction fees caused by banks acting as intermediaries during transactions.
Transactions processed by blockchain do not have intermediaries, which may reduce commissions, and they are checked 24 hours a day, seven days a week. Therefore, blockchain can offer the ability to process transactions in real-time or within seconds.
While there will be clear benefits for the financial services industry, blockchain has objectives that go far beyond finance. In fact, cryptocurrency and cannabis can be an ideal combination.
Emerald Health Therapeutics (NASDAQOTH: EMHTF) currently is not well-known among investors, but it aims to become one of the largest cannabis producers in Canada. The company recently announced a partnership with Village Farms VFF (TSE) International.
Emerald Health is refurbishing an existing growing facility with an area of one million square meters, which will include a brand new headquarters in British Columbia.
Blockchain’s transparency would be ideal for financial institutions wishing to audit cannabis companies, as well as for public institutions wishing to properly tax cannabis companies and regulate the industry.
Blockchain allows companies to manage their supply chains, allowing them to better identify where inefficiencies occur.
By eliminating paper and creating a real-time path that businesses can follow, blockchain should enable cannabis companies to improve their operations by reducing costs.
Before getting too excited about the possibility of combining the two hottest investments on the planet (cannabis and cryptocurrency), one should realize that blockchain may not pay off immediately for Emerald Health or the cannabis industry.
Blockchain has been around for almost a decade, growing in popularity with Bitcoin. It only took a few years for enterprises to start testing blockchain applications in demonstration and small projects.
However, even assuming that these tests will produce the desired results, it is unlikely that corporations will meet blockchain with open arms.
Furthermore, it is not likely that they will easily agree to discard all previous infrastructure. One of the biggest problems with blockchain is that it is not tested on a larger scale.
It is not necessarily compatible with existing infrastructure for some enterprises and industries, and others that may benefit from it are not taking advantage of this opportunity.
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(Featured image by André François McKenzie via Unsplash)
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First published in Pace Investment Club, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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