Miss the Bitcoin Rally? Profit from the Cannabis Bubble
Don't Worry, Get Wealthy
Last year we watched hype turn to mania in the cryptocurrency market. Bitcoin prices spiked to nearly $20,000 before collapsing. It was a classic bubble and bust cycle.
This year the hype has shifted from crypto to cannabis. And now some analysts are warning that the cannabis market is also in a bubble phase.
But that's not something to worry about yet. In fact, it's just the opposite... It's something to get excited about.
Don't Worry, Get Wealthy
A lot of people have a major misconception about market bubbles. Most assume that when they hear about a market or asset being in a bubble, that means a price collapse is imminent. But that's not necessarily the case.
A bubble is simply the complete phase of a boom and bust in a market or asset. We could be in the beginning, middle, or end of a cannabis bubble — or any other bubble, for that matter.
Market bubbles usually begin with some market-changing excitement. And that excitement eventually snowballs into hysteria buying, which causes prices to skyrocket. Alan Greenspan called it “irrational exuberance.”
The full run of a market bubble is generally characterized by a parabolic increase in prices followed by a collapse. Market bubbles usually look something like this:
Cryptocurrency was a textbook example of the bubble and bust cycle. You might remember that in the first half of 2017, a lot of hype was surrounding Bitcoin and other cryptos. But it wasn't until December that the hype snowballed into mania and prices went through the roof.
Another great example of hype turning to mania was during the 1970s gold bull market. Most people assume the price of gold steadily rose through the disco-era rally. But gold didn't see any big action until the very end of its bull market.
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Nixon took the U.S. dollar off the gold standard in 1971. That kicked off the long-term gold bull market.
Following the Nixon shock, gold prices rose a few hundred percent. But it wasn't until 1979 that the real mania for gold investing kicked in. That's when prices for the yellow metal soared. Take a look:
The lesson learned from all this is that a market or asset being in a bubble doesn't mean a price collapse is imminent. Yes, a price collapse in inevitable. But the hype takes time to convert to mania. And some of the biggest gains can be made in that final mania stage.
Looking at Bitcoin again, if you bought anytime in 2017 and sold at the top, you did great. But even if you bought BTC in November, you could have made a 200% gain by the end.
So has the cannabis market entered into a bubble phase?
Because even though the hype surrounding the cannabis market has intensified, the market is by no means in the mania stage yet.
And what this means is gains in the thousands of percent are on the horizon for us as investors as the mania stage sets in.
It's also important to remember, though, that there are a lot of good reasons for the excitement.
The legal marijuana market is one of the fastest-growing markets on the planet. Today the value of the global legal cannabis market in North America is about $8 billion. But by 2025, analysts predict the market to be worth some $83 billion — more than a 10-fold increase!
And that's just the North American markets.
By 2025, the global legal weed market is expected to be worth somewhere near $150 billion!
Right now investors are mainly considering North American markets. And the majority is focused on single-story companies like Canopy Growth (NYSE: CGC) and Tilray (NASDAQ: TLRY). But the big story is really global growth.
So the cannabis market may have entered into a bubble phase. And herd mentality may be driving prices. But the bubble is nowhere near fully inflated and nowhere near ready to pop. Not yet.
To your wealth,
Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy and Capital. Known as the "original bull on America," Brian is also the author of Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century, published in 2008. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox, and countless radio shows. For more on Brian, take a look at his editor's page.
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