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Getting High On Your Own Bitcoin Supply

True believers will say growing demand and acceptance, rather than speculative trading, justify the boom. Yet research firm Juniper reckons there has been no substantial uplift in consumer adoption in Bitcoin since 2014, despite a 50 percent jump in the number of transactions.

Hedge-fund investor Raoul Pal sold out of Bitcoin after deciding that a potentially endless supply of Bitcoins and blockchains would hurt, not help, prices. "You have so many people competing that the value of blockchain technology goes to zero," he said in June. "It's not the Bitcoin I first bought into."

Marijuana, meanwhile, is also propped up by a belief that demand will skyrocket—which in turn has boosted supply. Prices of legal marijuana have already fallen as growers flock to profit from the so-called Green Rush in states like Colorado. It's true that demand is clearly out there, with legal marijuana adding an estimated $2.4 billion to Colorado's economy in 2015. Research firm ArcView estimates recreational adult consumption of legal marijuana will grow sevenfold by 2021.

But how dependable is this market? The legacy of quasi-legal pot sales in the Netherlands is patchy: Amsterdam has lost roughly half its "coffee-shops" in two decades, and one study found young people's cannabis use fell between 1997 and 2005. The combination of social stigmas and twitchy politicians may hinder weed's adoption as a popular vice.

A rapidly growing market always brings with it fears that the bubble will burst. But overly-ambitious growth expectations looks like a bigger threat to crypto and cannabis enthusiasm than regulatory intervention. As in past market manias, regulators are likely to arrive late to the party—by which time investors' money may have already gone up in smoke.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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