Tokes Technical Analysis - Long term growth » Brave New Coin
Marijuana is used worldwide for medicinal, recreational, and spiritual purposes. The regulatory guidelines surrounding cannabis often vary wildly from region to region and legal cannabis-related businesses are becoming a growing part of the global economy.
A report from the Brightfield Group estimates the current global market at US$7.7 billion, and estimates a four-fold increase, to US$31.4 billion, by 2021. While the U.S. currently accounts for 90% of the global market, growth in the rest of world is predicted to outpace the U.S., resulting in a market share of ~60% by 2021.
A 2017 Gallup poll also showed 64% of Americans supporting marijuana legalization, the highest ever, as more and more states have already begun to legalize marijuana use for recreational purposes. According to the UNODC, American residents over the age of 26 have been driving domestic growth.
Legitimate dispensary operations have significantly decreased drug-related crime along the U.S. and Mexico border, according to a 2017 study published in The Economic Journal. The newly legalized trade contributed an estimated US$655 million in tax during 2017.
However, cannabis businesses are still illegal at the Federal level. An Obama administration policy that had eased enforcement of Federal marijuana laws in states that legalized the drug was rescinded by the U.S. Justice Department earlier this year, giving federal prosecutors wide latitude to pursue criminal charges. Attorney General, Jeff Sessions, has since threatened to begin strict enforcement of Federal law.
Despite the benefits and increasing public approval of legalized marijuana in the U.S., this State and Federal legal dance leaves businesses out in the cold.
Enter Tokes (TKS), which aims to put cannabis businesses on the blockchain. As explained in their white paper, “due to federal prohibition against cannabis, businesses within the industry must operate primarily in cash. These cash transactions occur at the point of sale, for business to business transactions and for employee payroll. Until conventional banking allows cannabis businesses to utilize their services, this cash only ecosystem has an added liability of potential loss, and increased accounting difficulty in a compliance heavy market.”
One cannabis business owner, Hezekiah Allen, shared his method of storing cash. “I buried everything. I had three different safes buried on a 200-acre parcel. Fifteen steps from the oak tree, a lot like a pirate. I had a little map. Pretty inconvenient and not the best cash management system.”
TKS was released in December 2016 on the Waves platform, where it raised just over US$80,000. TKS is one of the first ‘multi-stage’ ICOs, in the sense that its original issuance is designed to reflect the conventional investment landscape of Angel, Seed, and Series funding rounds. An upcoming series A round will be open to wholesale and strategy investors.
The total circulating supply is currently 1,525,553 TKS with an aggregate inflation rate of 0.146% per month since 2017, according to the Tokes Platform Transparency Report. TKS Ventures has been producing quarterly transparency reports on their treasury holdings and its governance. The main use of the treasury is to recapitalize the businesses as it requires growth, while the reports add transparency for investors.
TKS transactions take less than a second and fees are negligible, currently under one penny. This allows secure payment without the need for physical storage solutions relied on by the underbanked. The token is currently solely traded on Bittrex and can also be bought through the WAVES DEX.
Since the ICO, TKS has continued to focus on three pillars of business; supply chain management (SCM), a merchant gateway, and a transactional protocol (as discussed above).
Blockchain SCM solutions improve efficiencies across the board and have been adopted by several large food disruptors. TKS has begun to implement software which will help “plan, design, implementation, training and support” of supply chains, including; “cultivation, processing, packaging, quality assurance, and security, regulation, and compliance.”
Inevitably, as cannabis sales increase, so will attempts to counterfeit legitimate products, which is already becoming a problem. TKS is using a molecular biotagging system (currently in the FDA approval process), from Applied DNA Sciences, sprayed directly on the plant. The process underpins tracking and traceability.
The merchant gateway, currently in beta, will be developed with an integrated API, mobile app, and a point of sale system. Merchants can choose to hold TKS as they receive the token for purchases, transfer to another cryptocurrency, or sell for USD. Competitors include services like BitPay and Coinbase Commerce, neither of which are willing to take on cannabis sellers due to banking concerns.
The roadmap provides details on the process, including app development, a pilot process, and partnership building. The platform is already closely aligned with TheraCann, a global network of cannabis operation experts. Other partnerships include a Las Vegas entertainment and education company Herbology Tours, a native token on the Cannabis and Hemp Exchange (CHEX), and one dispensary who accepts Tokes, Pisos, which cleared ~US$10,000 in transactions in Q4 2017 according to Tokes CEO Michael Wagner.Technical Analysis
Being a small fish in a big pond means that TKS will essentially move in tandem with the wider market. TKS briefly swung to an record high, above US$12, in early January and is currently sitting near the daily 200EMA.
The Ichimoku Cloud metrics on the daily chart, which can be used to identify trending markets, are all bearish. However, a likely bullish TK cross on the horizon and growing Cloud suggests price has dropped quickly and began ranging without making lower lows. Based on this, price is expected to move through the Cloud towards the flat kumo at US$7.25. A long entry for the edge to edge trade would be initiated with a candle close in the Cloud, potentially in mid-March.
Using Fibonacci retracements and extensions, the immediate target is the 50% fib, also at US$7.25, so long as price does not make a lower low. Should price surpass the record high, the 1.618 fib extension at US$18.67 is a likely target.
Lastly, TKS/BTC has been ranging in a relatively tight channel, with a median of 50k sats, since being listed on Bittrex. Expect this range to hold until a candle close above the 80k sat resistance level.Conclusion
The cannabis coin sector is flush with options but only Tokes has implemented a long-term business plan tackling SCM, provenance, and banking solutions. U.S. Federal law is unlikely to change within president Trump’s first term, leaving cannabis business partners without banking relationships for another 2+ years. The Las Vegas, Nevada based team also plans to scale globally as TheraCann already has employees in Canada, Germany, Australia, and the Midwest. Technicals are slim simply based on the age of the market. Price will be driven by adoption and news events more so than technicals.