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Considerations for Investors in Marijuana or Cryptocurrencies

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Some considerations for investors

So far in this series, we’ve examined the pros and cons of marijuana and cryptocurrencies. It should be clear that investment decisions must be based on the end value an investment provides and the potential for its growth.

The present value of an investment depends on its future cash flows. To value an asset, it must have the potential to generate cash flows in the future.

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Valuing marijuana versus cryptocurrencies

Compared to cryptocurrencies, the running valuation of a marijuana stock is easier to assess. The forecasting of future cash flows depends on the market potential for legalized medical and recreational marijuana.

An investor may find forecasts from the company filings of marijuana players (MJX) such as Canopy Growth (WEED), Aurora Cannabis (ACB), CannTrust Holdings (TRST), and MedReleaf (LEAF).

However, assessing these forecasts for cryptocurrency is not a straightforward process. It is unclear what market potential cryptocurrency has in order to generate future cash flows, presenting a challenge to discover the present value of cryptocurrencies.

Without clarity on the market potential, we believe that cryptocurrencies are a speculative asset, which should explain the wild market movements in its price.

The Federal Reserve’s chair, Janet Yellen, recently called bitcoin a “highly speculative asset.” She added, “It is not a stable source of value, and it doesn’t constitute legal tender.”

An investor looking to learn more about the marijuana industry may refer to the following articles:

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