Editor’s Note: Welcome to the Early Investing Mailbag. Each week, we answer questions we think will help you learn about investing in pre-IPO startups and cryptocurrencies. If you have any questions for us, please email us at mailbag@earlyinvesting.com. Just remember, we can only answer your general questions for information and strategy. We can’t offer personal advice.
Q: I’ve noticed that marijuana investing is starting to get a lot of mainstream coverage. USA Today has even written several stories about investing, CBD extracts in wellness products and restaurants with CBD-infused food. Is the media just jumping on something that’s generating buzz or has marijuana and marijuana investing truly gone mainstream?
A: Are you accusing the Fourth Estate of being frivolous or pandering? Asking me to possibly defend the media is akin to asking me to root for the Yankees. It ain’t happening, my friend. (Editor’s note: Andy roots for the other evil empire – the Boston Red Sox.) So let’s jump to the second part of your question…
I wouldn’t call marijuana mainstream yet. But it is attracting a lot of attention – both good and bad.
It’s early. These companies are young. There’s a lot of speculative investing going on.
But is that good or bad?
Opportunity, like beauty, is in the eye of the beholder.
Some investors can’t stomach the risk that comes with investing this early… in young but up-and-coming companies with massive upside… whose prices are buoyed in part by excitement over the sheer size the future market represents.
Other investors embrace both the risk and the upside. I fall squarely in this group. That should come as no surprise to anybody who knows my strong belief in the benefits of investing early. It’s where the serious money is made.
But you can’t go crazy. You can’t get caught up in the hype. You can’t fork over your money when prices are insanely inflated. You can’t jump in without doing your homework. And you absolutely have to acknowledge the fact that investing early means your failure rate goes way up. But so do your power numbers. You’re not in this game to hit singles. You want home runs.
Which is why this isn’t mainstream. That’s way down the road when the better weed stocks will be making nice little gains in the 5% to 10% range that satisfy mainstream investors.
The cannabis market is not just buzzworthy (although there’s plenty of that) but also investment-worthy. The market is real. Its growth is real. Its growth is also predictable, despite its awkward regulatory status where it’s legal for recreational use in nine states plus Washington, D.C… legal for medical use in 31 states plus Washington, D.C… but NOT legal at the federal level.
The cannabis market is estimated to grow from $8.5 billion in 2017 to $23.4 billion in 2022, according to Arcview Market Research and BDS Analytics. That looks like a conservative estimate to me. Illegal sales of pot accounted for an estimated $46.4 billion in North America. And that was just 87% of the market.
Just to let you know, I prefer the cannabis wellness space to the recreation space. I think there are huge opportunities in that sector. And it’s not too early to identify companies with strong sales growth. But remember, the cannabis market is in its hypergrowth phase. That means ratios like price to sales will be somewhat (and justifiably) higher compared to other slower-growth industries (such as fast food).
USA Today’s coverage is legit. But, as usual for a mainstream media publication, it’s extremely late.
+ Early Investing Co-Founder Andy Gordon
Q: A lot of airdrops ask for an ethereum wallet address even though they’re not giving us ethereum. I thought you could only use an ethereum wallet for ethereum and a bitcoin wallet for bitcoin. What am I missing?
A: Good question, tricky answer.
Technically, Ethereum is a platform that you can build other cryptocurrencies and applications on top of. Everything on this network/platform is powered by ether (ETH), the native cryptocurrency.
Coins that are built on top of Ethereum adhere to the ERC-20 token standard. An example of an ERC-20 token is golem (GNT).
When an airdrop requests an ethereum address to send your new coins to, it’s asking for an ERC-20-compatible wallet address. You can use a hosted service, such as MyEtherWallet.com, or an ethereum wallet on your phone or computer. So that is the “ethereum address” that these airdrops need from you.
You cannot use an ethereum wallet on an exchange (such as Coinbase or Binance) to receive ERC-20 tokens. Exchange wallets are designed to hold only one cryptocurrency or token and will usually reject any other cryptocurrency sent to them. So if you tried to have an airdropped coin sent to your exchange ethereum wallet, it would likely be lost in transit and never recovered.
I recommend using a wallet such as MyEtherWallet.com or an ERC-20 software wallet for ERC-20 airdrops. Non-ERC-20 airdrops will provide instructions on how to receive your coins. You may be asked to download a specific wallet, depending on the airdrop in question.
When participating in airdrops, be sure to read all the instructions carefully and follow them to the letter. I recommend setting up a new email address exclusively for airdrops, just so your primary email account doesn’t get cluttered with crypto mailings. And always do research on projects offering an airdrop to make sure they are legitimate before participating.
+ Early Investing Co-Founder Adam Sharp