Mad Money’s Jim Cramer Invests 1% Of Net Worth In Bitcoin Says, “Gold Is Dangerous”
CNBC Mad Money host Jim Cramer plans to invest 1% of his net worth in Bitcoin because “gold is dangerous.” Mad Money’s Jim Cramer Will Invest 1% Of Net Worth In Bitcoin Says, “Gold Is Dangerous”
Recently, Jim Cramer, the host of CNBC’s Mad Money, says he might invest 1% of his net worth in Bitcoin (BTC). The famed investor drew comparisons between BTC and gold and cited the importance of hedging against inflation.
During a podcast with Anthony Pompliano, Cramer said he would “take a shot at that with 1%.”
Since the lead up to Bitcoin’s 2017 bull run, CNBC, Bloomberg and institutional analysts have been extremely critical of the digital asset. Most claimed that cryptocurrencies were ponzi schemes, scams, or unsustainable, but this narrative began to shift in April 2019 when the digital asset recovered from lows in the sub-$4k range.
Most investors view safe-haven assets like gold as the go-to hedge against inflation, but they do not invest in these assets expecting immense returns.
Speaking with Pompliano, Cramer said he is drawn to Bitcoin by its demonstrated ability to rise in value while also acting as an inflation hedge. He said:
“I mean people talk about like crypto gets hacked or whatever, you know what’s really bad? It’s when your kids can’t find your gold. And that is, by the way, not unusual. So this is why I am fixated on needing to own crypto, because I fear a massive amount of inflation, and I don’t have [any]. Gold will do okay, the houses will do okay, those will keep me running in place. The idea of actually making money, well holy cow, I’ll take a shot at that with 1%.”
It is not just Cramer who is considering opening a long position in Bitcoin. Billionaire investors like Paul Tudor Jones, and even multi-billion dollar public companies are beginning to invest in Bitcoin.
“On September 14, 2020, MicroStrategy completed its acquisition of 16,796 additional bitcoins at an aggregate purchase price of $175 million. To date, we have purchased a total of 38,250 bitcoins at an aggregate purchase price of $425 million, inclusive of fees and expenses.”
Major firms and high-profile investors are increasingly investing in Bitcoin because it acts as an inflation hedge and also has portability. The digital asset has also seen large returns over time, buoyed by the exponential improvement in the infrastructure and ecosystem surrounding Bitcoin.
Some investors argue that Bitcoin has all of the characteristics of gold as it is portable and has a fixed supply. In fact, billionaire investor and Gemini exchange co-founder Tyler Winklevoss believes BTC does a better job of being gold than the precious metal itself. Winklevoss said:
“As it turns out, bitcoin is better at being gold than gold — and not just incrementally, but by an order of magnitude or 10X better.”
Cramer Says Gold Is Dangerous, Wants Crypto Exposure
During the interview, Cramer specifically expressed concerns about the storage of gold. According to him, gold is dangerous for kids to hold, which makes Bitcoin more attractive. Cramer said:
“They [my kids] will never understand gold. And the reason they will never understand gold is they think gold is dangerous. It’s dangerous because it can be stolen, it’s dangerous because they don’t want to take it out of the bank, it’s dangerous because they may forget where it is.”
As Gold Crashes, Jim Cramer Says Money Is ‘All Going To Crypto’
The host of CNBC’s Mad Money responds to gold’s surprising underperformance this week.
As the price of gold plunged on Friday, CNBC’s Jim Cramer said the rise of crypto may partly explain the sudden disinterest in the precious metal — a potential sign that the mainstream has flipped the script on Bitcoin (BTC) and digital assets.
When asked why gold isn’t rallying amid the political chaos on Capitol Hill this week, Cramer said the market is either not as chaotic as it seems or that all of the money is going into cryptocurrency:
Either it is not as chaotic out there so gold doesn’t jump or it’s all going to crypto! But remember there has been no flight to quality (treasurys) https://t.co/nExv3O7dRm
— Jim Cramer (@jimcramer) January 8, 2021
The price of gold sold off more than $60 on Friday, hitting a low of $1,852.50 per troy ounce on the Comex division of the New York Mercantile Exchange. Bitcoin, meanwhile, surged to new all-time highs above $41,000.
Cramer is a recent convert to Bitcoin and cryptocurrency, having bought the mid-December 2020 dip when BTC was under $18,000. He said of his purchase at the time:
“I will buy — like I usually do — as something comes down. […] I’m going to diversify into some Bitcoin — not a big position for me — but it’s certainly important to be diversified, and Bitcoin is an asset and I want to have a balance of assets.”
If Cramer held onto his BTC, his position has more than doubled by now.
The flagship cryptocurrency continues to outperform gold and every other major asset thanks in part to an influx of new institutional buyers. Measured in bullion, 1 Bitcoin is now worth more than 20 ounces of gold. A week earlier, the Bitcoin-gold rate was around 15 ounces.
The idea that Bitcoin is taking market share from gold is nothing new. A recent analysis from JPMorgan Chase concluded that Bitcoin’s digital gold narrative is pulling investors away from precious metals. The analysts said this trend could intensify as more institutional money pours into the crypto space.
CNBC’s Jim Cramer Says He Won’t Buy Bitcoin Above $20K Following 20% Crash
“This is no different than an entirely erratic stock,” said Cramer.
Jim Cramer, the host of CNBC’s Mad Money, said he is still “playing with the house’s money” after selling off some of his crypto before the recent price crash.
In an interview with TheStreet, Jim Cramer said he still believed in Bitcoin (BTC) despite a $10,000 price correction over the past three days. However, he added he was unlikely to buy more unless the price goes under $20,000.
“My goal was to get my cash out so I don’t have to think about it,” said Cramer. “If it goes back under $20,000, I’m a buyer again. But I got my cost out, and I’m playing with the house’s money. This is no different than an entirely erratic stock.”
The CNBC host reported he had “sold enough Bitcoin” last week to cover his initial stake in the crypto asset. Cramer reportedly purchased his first Bitcoin in mid-December when the price was in the $17,000s, at the time calling it a “decent level.”
The price of Bitcoin has fallen more than 23% since reaching an all-time of more than $42,000 on Friday. It is currently trading at $32,192.
Gold Bug Frank Holmes’ 2021 Volatility Ranges: $80K Bitcoin And $3K Ethereum?
$80K Bitcoin and $3K Ethereum are within US Global Investors CEO Frank Holmes’ volatility range for 2021. He also sees $400K Bitcoin on the cards after the next 3-4 years.
Frank Holmes, CEO/CIO of US Global Investors, believes Bitcoin and Ethereum could reach $80,000 and $3,000 respectively in 2021. He also sees the possibility of Bitcoin dropping to $20,000 and Ethereum dropping to $500. This wide spread is derived from a philosophy he calls the DNA of volatility.
DNA Of Volatility
According to Holmes, each asset class has its own DNA of volatility, or the typical percentage of price fluctuation over a period of time. He finds it particularly intriguing when two different assets have similar volatilities. In this interview, he points out that the DNA of volatility of Tesla is the same as Ethereum.
The stock market, the S&P 500, is 1%. Gold is 1%. Gold stocks are 2%. But Tesla is 5%. Ethereum is 5%. Bitcoin is 5%.
So why do these two seemingly disconnected assets have similar DNAs of volatility? Holmes believes that a higher range of volatility is an indicator of a disruptive asset. Tesla is disrupting the car industry while cryptocurrencies are disrupting the global financial sector. Although these assets inhabit wholly different industries, they are both agents of change, which creates similar uncertainty and volatility in price.
Bitcoin Will Become Art
The crypto space is famous for high-flying Bitcoin price predictions. Some, such as Dan Held, even believe Bitcoin could hit $1,000,000 per coin. But if Bitcoin were to reach even a third of that number, how would it happen?
“What will drive it to $400,000 valuations, I hear, is because it’s going to become art. It’s going to be classified as a collector’s item.”
Looking 3-4 years down the road, Holmes postulates that Bitcoin will still be valuable as art even if it doesn’t become the sovereign digital money it was originally built to be. He likens owning Bitcoin to having an original Andy Warhol print, except Bitcoin is far more transactable.
“It’s amazing…and there’s a limited supply!”
Gold Rout Deepens With Metal Set For Worst Month In Four Years
Gold headed for its worst month since late 2016 as a stronger dollar and expectations for improving economies diminish demand for the haven asset.
The Bloomberg Dollar Spot Index was on course for a second week of gains. Meanwhile, a report Friday showed U.S. personal incomes soared in January as pandemic-relief checks helped to re-charge the economy with the strongest spending advance in seven months.
Bullion has fallen more than 8% this year as traders focus on a recovery from the Covid-19 pandemic and higher Treasury yields, which make the metal less competitive because it doesn’t offer interest. That has caused holdings in bullion-backed exchange-traded funds to fall to lowest since July.
Gold “is having a rough 2021 and the only thing that can right the ship is if central banks thwart the trajectory of bond yields,” said Edward Moya, a senior market analyst at Oanda Corp. “The Fed will have plenty of opportunities to stem surging Treasury yields, but for now it seems they can be a little more patient.”
Federal Reserve Chairman Jerome Powell this week assured investors that the central bank is in no rush to pull back stimulus, boosting demand for many raw materials while further reducing the appeal of gold as a haven asset. Powell called the recent run-up in bond yields “a statement of confidence” in the economic outlook.
Bullion declined further on Friday as traders exited positions, with U.S. equities trading mixed and global bond rout easing.
“Gold got hit aggressively just after the cash equities open today,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets, noting that investors sold their holdings after the metal failed to maintain the key levels of $1,760 to $1,765 an ounce in overnight trading.
Spot gold dropped 2.4% to $1,728.92 an ounce at 3:22 p.m. in New York, after slumping to the lowest since June earlier. It’s down more than 6% this month, on pace for its biggest loss since November 2016. Futures for April delivery on the Comex fell 2.6% to settle at $1,728.80 an ounce.
Silver and palladium declined more than 3% on Friday, while platinum was down more than 2%. The Bloomberg Dollar Spot Index rose 0.6%.
Natixis’ Bernard Dahdah said he wouldn’t expect the same “collapse” in gold seen in 2011, “but clearly there will be some pressure on prices as economies in the West open up.”
He sees gold around $1,700 in the longer term given the abundance of liquidity in financial markets. Bullion may also face downward pressure from stock market selloffs as some investors look for cash to cover margin calls, he said.
Bitcoin On ‘Inevitable Path’ To Reach Gold’s Market Cap – Mike Novogratz
Galaxy Digital’s billionaire CEO told CNBC he’s shocked at the speed of cryptocurrency adoption.
Galaxy Digital CEO Mike Novogratz believes Bitcoin (BTC) is on track to meet or exceed gold’s market capitalization amid a rapid wave of retail and institutional adoption of the digital asset.
In an interview with CNBC’s Squawk Box, Novogratz said cryptocurrency “adoption’s happening much faster than I predicted,” adding that “it’s shocking to me how fast people are moving into the system.”
Novogratz, who has been involved in Bitcoin since 2013 when the digital currency was valued at around $100, explained that his previous BTC price target of $60,000 was too conservative. The initial target was based on Bitcoin achieving roughly 10% of gold’s market capitalization.
“At the beginning of the year, I thought $60,000 was my target because that would have been 10% of gold,” he said. “But I told myself and our investors that once it gets to 10% we’re all going to say it’s going to 20%, and then when it gets to 20% it’s going to go to 50% and then 100%.”
Bitcoin’s emergence as “digital gold” has strengthened Novogratz’s conviction that the cryptocurrency will eventually reach or exceed bullion’s market value:
“I do think bitcoin is on an inevitable path to having the same market cap and then a higher market cap as gold.”
Current estimates place the total market capitalization of gold at roughly $10.7 trillion. Bitcoin, by contrast, has a total market value of $1.1 trillion.
Bitcoin appears to be outshining gold in the battle of the safe havens, with some prominent analysts claiming that BTC is taking market share away from the yellow metal. In December 2020, JPMorgan Chase strategists said Bitcoin’s ascendance would serve as a headwind for bullion in the short term.
One Bitcoin is currently worth 34.49 ounces of gold. This time last year, the ratio was around 4.19 ounces.
Gold Falters On Brightening Economic Outlook
Bullion had its worst quarter since 2016 as optimism about the pace of economic rebound curtailed investors’ appetite for safe-haven assets.
The gold market has lost its glint, dashing the hopes of people who predicted that lavish stimulus spending by central banks and governments would send bullion prices to new heights this year.
Gold futures on Wednesday closed their worst quarter since 2016, falling 9.5% to $1,713.80 a troy ounce. Few assets have fared worse: namely, the price of orange-juice futures, cocoa, Turkey’s lira and long-term U.S. government bonds.
The precious metal has suffered a reversal in fortunes since August, when prices closed at a record $2,069.40 a troy ounce. Gold has since dropped 17%. Forecasts of a rapid global economic expansion this year, powered by vaccinations and U.S. stimulus, have tarnished gold’s allure as a haven in uncertain times.
“As people have got more optimistic about the world economy, interest rates have risen and the relative perception of gold to other yielding assets has become less attractive,” said Nabeel Abdoula, deputy chief investment officer at Fulcrum Asset Management.
The London-based hedge fund has cut its gold investments in the last year. It still has holdings in the precious metal using futures and options, said Mr. Abdoula.
Gold’s 75% surge starting in August 2018 had prompted bulls to say low interest rates and swelling deficits would debase the dollar, fueling inflation and pushing the metal higher still. Concerns about inflation have long failed to materialize: Forces including an aging population and globalization have helped to keep U.S. inflation low and stable for about three decades.
Instead, robust U.S. growth has unexpectedly strengthened the dollar: the WSJ Dollar Index rose 3.1% in the first quarter. A stronger greenback makes many commodities more expensive for buyers using other currencies.
The argument for holding gold as a hedge against inflation has also endured a setback this year. The prospect of buoyant economic activity and higher inflation fueled a steep rise in yields on U.S. government bonds in the first quarter.
Real yields, or the returns on government bonds after adjusting for inflation expectations, also jumped, raising the opportunity cost of owning gold, which doesn’t offer an income.
Fulcrum’s Mr. Abdoula sees three paths for gold from here.
In the first scenario, bond investors who are betting the Federal Reserve will raise interest rates sooner than it says to curb inflation may be proven right. That could send gold prices spiraling lower.
In the second, Fed officials are correct in projecting that a spurt of inflation this year will be short lived and that the central bank will keep rates near zero through 2023. In that scenario, Mr. Abdoula reckons gold prices have fallen too far.
The third possibility is that disruptions to the global supply chain for vital products such as electronic chips and plastics, or other factors, generate higher and longer-lasting inflation than investors or the Fed currently predict. That might depress real bond yields and boost gold, Mr. Abdoula said.
Gold’s decline has knocked down shares of miners including Barrick Gold Corp. It has also weighed on exchange-traded funds backed by gold, which are a cheap and easy way for individual and institutional investors alike to bet on prices. Investors have pulled a net $7.52 billion this year from the SPDR Gold Trust, the biggest such fund, according to FactSet.
In the early months of the pandemic, the metal was a prime beneficiary of a collapse in interest rates. Analysts at banks including Goldman Sachs and Citigroup touted gold as an investment. Money poured into gold-backed ETFs. Warren Buffett’s Berkshire Hathaway Inc. added to the excitement when it invested in Barrick.
That zeal has cooled. Several banks have slashed their forecasts for gold prices. Goldman Sachs in February cut its 12-month outlook to $2,000 a troy ounce, from $2,300 in August.
“What we got wrong is the underlying economic growth environment is far stronger,” said Jeffrey Currie, head of commodities research at the bank. Investors have switched out of gold and into markets that stand to prosper from the lifting of lockdowns, such as industrial metals, he said.
Another factor reducing the attraction of gold is that the metal has failed to act as a hedge that zigs when riskier assets like stocks zag. In recent months, the correlation between the metal and the S&P 500 has been consistently positive.
Some investors remain bullish on gold and see now as a time to buy. Daniel Egger, chief investment officer at Switzerland’s St. Gotthard Fund Management, said central banks will push back against rising bond yields, giving gold a new lease of life.
A sustained rise in inflation-adjusted yields “would suffocate the real economy considering the enormous amounts of debt that have come to the market,” Mr. Egger said.
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