Tilray Brands (NASDAQ: TLRY) and Bitcoin (CRYPTO: BTC) are not in the same league. On the one hand, Bitcoin is a leaderless cryptocurrency, with many evangelists but no true stewards, and Tilray is a massive global cannabis company, complete with management, operations, assets, and a roadmap for the future.

But for investors considering where to invest their money, both investments can be seen as falling into the same category of very risky but potentially highly rewarding options. So let’s dive in and examine which of these two is more likely to grow, or at least less likely to lose you money if you decide to buy it.

The Tilray case

Tilray’s vision is to be the largest marijuana business in the world, while also being a major competitor in the alcohol industry in North America, and perhaps elsewhere.

Along the way, the administration has high hopes of legalization of marijuana in the US, as it has an agreement that will grant it a minority stake in a national cannabis business when federal legalization occurs. Likewise, its EU positioning is in medical marijuana, with the idea that as markets open up to recreational use, Tilray will be the first supplier in line to access consumers.

To achieve your vision, you will have to rectify your operations so that they produce more money than they burn. In its third fiscal quarter, it reported operating losses of more than $82 million, despite having recently concluded a cost-saving campaign in its presence in the Canadian domestic market. While management sought to lead the company to be free cash flow (FCF) positive on an adjusted basis before the end of this fiscal year, in its third-quarter earnings report it abandoned that target.

It is now unclear exactly what the next steps will be. Legalization in the US and EU is not a guaranteed outcome, and recent reforms, as well as proposals for other reforms, have moved at the pace of molasses in a freezing (very slow) January. Continued market leadership in the EU medicinal segment is possible, as is maintaining its leading share in the Canadian recreational market.

But with an uncertain timeline for the catalysts affecting its profits, and with its bottom line still suffering tremendously, it will remain in risky territory for the foreseeable future.

Bitcoin looks good now

As the king of cryptocurrencies, Bitcoin remains volatile and risky despite its long-standing and widespread adoption. Furthermore, as it is currently relatively close to its all-time high, bears tend to assert that the only direction it is likely to go is down. After all, as critics say, the technology has no real-world use cases and its price is largely a matter of unbridled investor psychology and desire for speculation.

The story continues

As convincing as these arguments may seem, they neglect to address the most fundamental aspect of the economy: supply and demand.

Imagine, if you will, the graph that appears countless times in all economics books, with the price of a good on the Y axis and the demand for the supplied good on the X axis. Now imagine the demand curve line, which starts at the corner top left and goes down to the right, representing that demand for goods increases as prices fall and vice versa. Next comes the supply curve, which starts at the bottom left and extends upward and to the right, showing that as prices increase, the creation of more supply is encouraged.

The intersection of the supply curve and the demand curve is the equilibrium point. But what happens when supply becomes much more difficult to produce? The quantity supplied must decrease, which leads to higher prices at the same level of demand.

Due to the self-imposed limits of the protocol itself, there are a finite number of bitcoins that can exist – 21 million, to be precise. 19 million of these coins have already been mined, meaning they are in circulation, at least nominally. In April, the “halving” took place and miners will now only harvest half of the cryptocurrency with each new block they mine. And what do you think will happen at that point in the supply and demand graph?

If you said that the price per currency will rise, that is indeed the classic answer, and many people are heavily invested in this answer being proven true. Of course, the real world is much more complicated than the simplest of theoretical economic frameworks, and nothing is guaranteed.

The market may already be pricing in the future impact as the approximate timeline of its occurrence has long been known due to the fact that the increase in mining difficulty occurs mechanically after mining a certain number of blocks. However, there is a clear potential catalytic event underway that could lead to significant growth.

The verdict

Currently, Bitcoin appears to be the riskier investment than Tilray Brands.

While Tilray’s U.S. marijuana legalization plans were indeed a major catalyst for the company, many cannabis stock investors were shortchanged by predicting that legalization is just around the corner. The political situation remains contentious, and Tilray’s continued operational inefficiency doesn’t inspire much confidence that it can generate solid returns.

Bitcoin may or may not gain value significantly in the coming months. The point is that your catalytic converter is working now, rather than languishing while subject to legislation or regulations, and that’s what makes it worth buying.

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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool recommends Tilray brands. The motley fool has a disclosure policy.

Tilray Brands Stock vs. Stock Bitcoin: Which investment is worth the risk? was originally published by The Motley Fool

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