Here's How Declining Marijuana Prices May Affect The Market

As the legal marijuana industry is still in its infancy, businesses dealing in the drug are still struggling to find their feet. The industry itself is seen as a major money maker, with some estimating that could become a $35 billion industry in the next decade if all states legalize cannabis use. At the moment, interest in legal marijuana is at an all time high, but many analysts say that the newness of legal marijuana will wear off soon and when it does, the price to get high will drop lower.

A

by research firm Convergex showed that marijuana users are spending less and less money on cannabis products. The figures showed that while dispensaries typically see between 100 and 300 customers per day, the average per-customer spend has fallen from $50 to $100. Meanwhile, the average price per 1/8th of an ounce of marijuana has fallen by around 38 percent over the past year.

The falling price of marijuana could make the drug more accessible to average Americans, thus propelling the industry forward. However, it could also put a strain on marijuana firms as it will cut down on their margins. With growers already struggling with the high costs of maintaining the plants, falling prices could make the industry much less appealing.

For the average investor, the marijuana market

to park their money. Although there is a lot of potential in the blossoming industry, most marijuana stocks still trade OTC and have a high degree of volatility. Additionally, the lack of past experience with price cycles and consumer behavior makes the sector a difficult one to evaluate.