Bitcoin gains massive institutional capital inflows on major US exchanges; not THC
Something big happened in the stock market two weeks ago and it was all over the news - the US Securities and Exchange Commission (SEC) approved multiple bitcoin ETF’s that hold bitcoin. After several years of waiting, investors can now trade ETFs that own bitcoins directly. This marks a major regulatory change by an SEC that delayed approvals for years. Why is this important? As Andrew Bond, managing director and senior fintech analyst at Rosenblatt Securities said, “It's a huge positive for the institutionalization of bitcoin as an asset class.”
At Pac Garden Assets, we love cannabis as an asset class (in fact, we have this cultivation asset and this cannabis manufacturing asset for sale right now). We recognize that our industry desperately needs the same level of legitimacy afforded to bitcoin. Why? It all has to do with capital:
- California dispensaries are running record high accounts receivable as the lack access to normalized banking.
- Retail taxation is far too high, effectively penalizing business owners large and small, and drastically reducing free cash flows.
- Most Institutional investors can't or won't invest in cannabis for the regulatory risks
Just look at what happened to the top bitcoin ETFs that won SEC approval on January 11th, 2024; in the following days they had inflows of several billion dollars (source - Bloomberg News):
- iShares Bitcoin Trust (IBIT) - $1.75B
- Fidelity Wise Origin Bitcoin Fund (FBTC) - $1.6B
- Bitwise Bitcoin ETF (BITB) - $518M
If you don’t think this sort of capital inflow would be significant for the cannabis sector, consider the longest running ETF for US based cannabis operators traded OTC in the US has net assets just north of $600M today (source - Market Watch).
So again, why do weed companies need institutional support? Because Institutional investors provide extremely large sums of capital to legitimate - i.e. not federally illegal - asset classes:
An institutional investor is a company or organization that invests money on behalf of other people. Mutual funds, pensions, and insurance companies are examples. Institutional investors often buy and sell substantial blocks of stocks, bonds, or other securities and, for that reason, are considered to be the whales on Wall Street (source - Investopedia)
Every regulator at the SEC seems to catch a whiff of weed and run the other way. Yet consumers line up at dispensaries to buy safe and effective cannabis products in regulated markets across the country. It’s high time for THC to earn the legitimacy of BTC, and regulators need to step up and do their job.
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