Congress is not Expected to Lift the Federal Cannabis Ban before 2022
This week, marijuana business watchers have stated that current matters have keptCapitol Hill too busy to divert attention to the federal prohibition on cannabis. This is specifically due to the issues that include healthcare and the likely tax hike that is still under discussion. Due to this, it is not likely that lawmakers will give this issue any attention in the forthcoming.
However, the next six months may possibly provide a timeframe for some effort in 2022Ancillary cannabis companies like GrowGeneration GRWG, -0.35% and Green lane HoldingsInc. GNLN, 1.14% benefit off of the Congress’s delay as this results in an increase in their market share due to the increased competition that would come with federal legalization of cannabis. Cannabis ETF THCX, -0.37%, has gained 7.8% in a year alongside S&P 500 SPX,-0.91% which has gained 18.3%. Meanwhile, AdvisorShares Pure US Cannabis ETF MSOS,-0.67% has decreased 15%.
Three opinions have emerged in Congress when it comes to potential legislation. There are Democrats that support a more all inclusive solution (like the Opportunity and CannabisAdministration Act). This bill would work to fix the harm caused by the War on Drugs specifically in minority communities along with addressing other issues regarding social impact.There are also supporters of the SAFE banking act that works to open the federal banking system to the cannabis sector. If this act passes, it would allow companies to work with banks without having to worry about federal enforcement. This act has garnered support from both sides and has passed the House of Representatives this past April, but has yet to be passed in the Senate.The third view does not agree with either act and aims to classify cannabis as a banned schedule1 drug such as heroin.
In the meantime, business continues to increase on a statewide level in states that have legalized cannabis for recreational use or medical use such as Illinois and New York. However, investor interest around cannabis is strong as people believe the federal ban will be lifted in the future.
This is not exactly the case for larger Wall Street banks as they are wary about approving loans or services to companies that are in direct contact with marijuana due to conservatism.
Bitcoin Could be Spared from the Global Market Correction
Throughout its time, Bitcoin (BTCUSD) has had its share of rejections when considering it as a plausibly safe financial asset, when compared to securities, real estate, and gold. Experts have named Bitcoin “digital gold” and a perfect store of value. Others perceive Bitcoin as a technology project geared towards a future with digital currency.
Analysts have searched endlessly for assets that Bitcoin’s price action mimics throughout financial crises. During the March 2020 crash for the global economy, Bitcoin’s price action mimicked Gold fairly accurately, but during 2021 Bitcoin and Gold moved in opposite directions ruling out the possibility of following each others’ price action.
Since the end of 2020, Bitcoin’s price action has mimicked the Hong Kong stock market consistently. This is evident when comparing the price action of the Hang Seng Index (HSI) ofHong Kong which includes technology giants in Asia such as Alibaba (BABA), Tencent, and Meituan.
Over the past few months though, investors have noticed strong support levels in Bitcoin that are reducing the downside risk when compared to HSI. On September 14, China’s second largest property developer, Evergrande Group, announced that they are defaulting payments on liabilities exceeding an amount of over $300 billion dollars. Evergrande executives explained that a decline in sales led to weak numbers. This news shook up global markets with the DowJones down over 900 points or greater than 3% down as well as the Nasdaq being down Monday morning.
Bitcoin also saw a price decline of nearly 15%, but analysts claim Bitcoin’s price seems less likely to decline catastrophically than global stocks. If clients decline on their debt payments, banks and other lenders liquidate their other assets such as commercial real estate, stocks, and bonds. Since Bitcoin is not a traditional financial asset, along with other cryptocurrencies, it can be looked at as a “safe haven” for investors looking for security from banks and lenders.