A trader’s job is never easy. That’s true almost by definition. But one key lesson that most every trader learns quickly is: Go where the action is. 2017 has been an interesting year thus far. Our job today is to take a closer look at two of the most interesting and most talked-about market spaces: Cannabis and Bitcoin. But first, let’s put things into context.
The year got started with one theme dominating the action: the recent election of Donald Trump as the 45th President of the United States of America. That event completely redefined global financial markets as investors began to anticipate a strong-handed push for widespread deregulation, huge tax reforms, and a massive infrastructure-centric fiscal stimulus meant to supercharge economic growth. The markets also shifted in anticipation of a US trade policy geared toward protectionism and a “zero-sum” view of global relationships – ie, that there are winners and losers, rather than better versus worse global outcomes. It’s a bit like going from a mentality that concerns itself with the size and quality of a pie to one that concerns itself with how big a slice we get on our plate.
However, while all of that stuff was dominating the headlines in the Wall Street Journal and Financial Times, two other trends were starting to take over the spotlight among small cap growth investors.
On the same day that the crown was pressed down on Trump’s head, 9 states went to the ballot boxes in the US to vote on marijuana legislation, with 8 of them passing measures to drastically increase the legality of marijuana use across the US. We saw this rally power most of the leading plays in the space, including Cannabis Sativa Inc (OTCMKTS:CBDS), United Cannabis Corp (OTCMKTS:CNAB), OWC Pharmaceutical Research Corp (OTCMKTS:OWCP), Cannabis Science Inc (OTCMKTS:CBIS), and Marijuana Company Of America Inc (OTCMKTS:MCOA).
Several weeks later, investors learned that legislation was coming in Canada to fully legalize marijuana for both medical and recreational use on a nationwide basis. That most directly impacted a number of leading Canadian cannabis plays, such as AURORA CANNABIS IN COM NPV (OTCMKTS:ACBFF), APHRIA INC COM NPV (OTCMKTS:APHQF), NEW AGE FARM INC COM NPV (OTCMKTS:NWGFF), and CANOPY GROWTH CORP COM NPV (OTCMKTS:TWMJF), among others.
That news formed the backdrop for some truly explosive action among a broad group of stocks in the cannabis patch.
Now, it seems as though we are starting to see some similar action for stocks involved in the Bitcoin market space. The value of Bitcoins, in dollar terms, has exploded higher, nearly tripling in the past 3 months. And several related stocks and asset plays are ripping right along with it. The best way to gauge (or, indeed, to impact) interest in any security is through allocation. And this is often a two-way street: allocation grows as accessibility increases; and accessibility increases as interest (allocation) grows.
It’s what we call a “self-reinforcing feedback loop”. That’s what we are seeing here between bitcoin and Bitcoin Investment Trust (OTCMKTS:GBTC). In fact, as we see it, the marketing work has been done sufficiently to get the process of that feedback loop going. All that’s necessary is a vehicle with tons of liquidity and accessibility, and public allocation (and interest) in bitcoin will have an avenue of mass appeal and growth.
GBTC is making a bid to be that vehicle with an active application to become an official “commodity trust Exchange Traded Product”. Will regulators finally allow a super accessible big board bitcoin ETF?
The last two such attempts were thwarted for a very specific reason: The SEC has ruled repeatedly that a commodity trust, in order to qualify as a potential exchange traded product, must have two characteristics.
First, it must have surveillance-sharing agreements in place if it is an international asset (which bitcoin most certainly is, and which bitcoin most certainly does not). And second, it must be a “regulated” market (which bitcoin is not). Hence, unless a whole lot changes, GBTC will not IPO as a big board Bitcoin ETF. That said, for many average investors and market participants, there simply isn’t an easy way to feel comfortable betting on Bitcoin. And GBTC allows for such a move.
There are a few other accessible Bitcoin stocks to watch as well: BITCOIN SERVICES I COM USD0.001 (OTCMKTS:BTSC), FIRST BITCOIN CAP COM NPV(OTCMKTS:BITCF), WPCS International Incorporated (NASDAQ:WPCS), UBI Blockchain Internet Ltd (OTCBB:UBIA), and MGT Capital Investments Inc. (OTCMKTS:MGTI).