Bitcoin and the Legalization of Marijuana

After Colorado and Washington voted to legalize marijuana, stocks such as CBIS and MJNA saw gains as high as 750%. MJNA moved from $0.03 to $0.36 a share, and CBIS rose from $0.032 a share to $0.293. They went through a stagnation period, then decline and now seem to have leveled off. Bitcoin went from around $100 to over $1,100 and since has been settling in the low $600. What do marijuana stocks have to tell us about Bitcoin?

First off, the buzz was greater than the implementation. After weed became legalized people expected widespread adopts, for the Federal Government to get on board and for fellow states to follow suit. Especially after the tax revenue of $14 million from the sale of weed was posted people were sure other states were going to get involved, but they didn't. While Maryland, Minnesota and New York all passed legislation in 2014 to legalize medical marijuana, that only brings to the total states who've legalized medical use to 23. Only two states have legalized recreational use. That's only 4% of all the states.

Stock prices for companies like CBIS had to go down because the hype was bigger than it really was. It's not to say demand was greater than supply, just that speculation was greater then implementation. The hype had pushed the prices of these stocks up, way up before people realized that implementation and adoption was a lot further off than they thought. I expect we'll see Alaska and Oregon follow Colorado and Washington, but don't expect all the states to legalize it at once.

But how does this apply to Bitcoin?

Let us think of the states that have legalized medical marijuana as countries that allow the use of Bitcoin. It's not a perfect analogy but work with me on it. Now let us make the two states that have legalized recreational use as the places that accept Bitcoin. Let's take one more step further and pretend Colorado is China - I’m sorry Colorado.

What happened?

China's major internet provider began accepting Bitcoin and investors flooded the Chinese Bitcoin exchange. The price of a Bitcoin skyrocketed and people were sure the coin was going to catch on like a California wildfire. Speculation far exceeded implementation and adoptions and rather than seeing Bitcoin in the $1,000 range we are fluctuating between high $500 and low $600. Like CBIS and MJNA the price of Bitcoin is still higher than it was before all this, but it's well below it's 12 month high.

Bitcoin hasn't caught on as fast as we'd hoped. Don't get me wrong, it's being used and adopted every day, but it's still not at the rate we expected. Major retailers like Amazon haven't gotten on board, and the ones that have, like Tiger Direct, have known issues they've yet to resolve. We still don't know how our government will fully react to Bitcoin. One of the biggest concerns I have is that miners could theoretically be liable for MTB classification, which would end individual mining for good.

With all these unknowns and slower than expected adoption, it's no wonder that the price of a Bitcoin came down. The value of a Bitcoin could easily exceed $1,000, but for now adoption has to catch up with speculation.

Information provided in this article is not intended to constitute an invitation or an inducement to engage in any investment activity. Featured image by Shutterstock.

Last modified (UTC): July 16, 2014 10:16 AM

Carter Graydon @BitcoinWriter

A UNC Chapel Hill graduate, blockchain enthusiast and analyst. I have a background in programming and IT, strong studies in econ, stats and game theory. Currently working as a Social Media Director and pursuing my MS in Online Marketing - busy!

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