He added that bitcoin is too volatile to be used as a currency. “Imagine business owners trying to trade with Facebook or Google stock…it’s ridiculous” he pointed out.
Jim Cramer prefers gold to crypto-currencies
The host of CNBC’s Mad Money show, Jim Cramer, offered some investment advice Monday regarding gold and crypto-currencies. Cramer is a former hedge fund manager who co-founded Thestreet.com, a financial news and literacy site.
He believes investors should stay away from crypto-currencies despite bitcoin’s recent gains. Referring to charts interpreted by Carley Garner, senior commodity strategist and options broker at Decarley Trading, Cramer stressed that investors “should ignore the crypto-currency cheerleaders now that bitcoin is rebounding.” He went on to advise:
If you seriously want a real hedge against inflation or economic chaos, it… [Garner] says you should stick to gold. And I agree.
Quoting Garner, the Mad Money host explained that the correlation between bitcoin futures and the Nasdaq-100 is very high, as shown on their daily charts going back to March 2021. This indicates that bitcoin is behaving more like a risky asset than a store of value or stable currency, Cramer said, noting:
Imagine business owners trying to trade with Facebook or Google stock … it’s ridiculous, they’re too volatile. Bitcoin is no different.
Unlike Cramer, some people think bitcoin is a better hedge against inflation than gold, including venture capitalist Tim Draper and billionaire hedge fund manager Paul Tudor Jones.
Cramer also warned of the “counterparty risk“, that is, the possibility that the other party to a transaction or investment will not fulfill its obligations. “Of course, you can simply own bitcoins directly in a decentralized wallet – that protects you from counterparty risk“, he opined. “But if you ever want to use it for anything, the risk comes back to the table. And as FTX customers have learned, it can be devastating.“
The Mad Money host used to invest in bitcoin, ether and non-fungible tokens (NFTs), but he sold all his crypto holdings last year. He used to recommend bitcoin alongside gold. In March 2021, he stated, “I’have, for years, said you should have gold … but gold’has let me down. Gold is subject to too many vicissitudes. It is subject to mining problems. It is frankly subject to failure in many cases.“
He also repeatedly warned that the U.S. Securities and Exchange Commission (SEC) would make a “raid“non-compliant crypto companies, advising investors to get out of crypto now. “I wouldn’t touch crypto in a million years” he stressed. Cramer has often quoted John Reed Stark, the SEC’s former head of Internet enforcement, who recently said that “regulatory onslaught is just beginning.“