CNBC’s Jim Cramer on Monday warned investors to stay away from crypto despite bitcoin’s recent gains and instead look to gold.
“The charts, as interpreted by Carley Garner, suggest that you should ignore crypto cheerleaders now that bitcoin is bouncing. And if you’re serious about wanting a real hedge against inflation or economic chaos, she says you should stick with gold. And I agree,” he said.
Bitcoin continued to gain on Monday, reaching as high as $23,155.93 as investors vowed that the Federal Reserve will ease the pace of interest rate cuts or stop them altogether.
The price of the digital currency reached $23,333.83 on Saturday for the first time since August, according to Coin Metrics. That’s a nearly 39% rise in bitcoin since the beginning of this month.
To explain the analysis from Garner, who is the strategist and senior broker in the commodity market at DeCarley Trading, Cramer examined the daily chart of Bitcoin futures and the tech-heavy Nasdaq-100 going back to March 2021.
Garner pointed out that the two indexes are almost trading in lockstep, suggesting it’s a risk asset rather than cash or a stable store of value, according to Cramer.
“Imagine business owners trying to make transactions with shares of Facebook or Google … it is ridiculous, they are too volatile. Bitcoin is no different,” he said.
The reason they trade so closely is because of “counterparty risk,” which is the likelihood that the other party to an investment or transaction might not live up to its end of the contract, Cramer said.
“Of course, you can hold Bitcoin directly in a decentralized wallet – which protects you from counterparty risk – but if you ever want to use it for anything, the risk is back on the table. And as ‘FTX customers have learned, it can be disastrous,’ he said. “On the other hand, gold, well, it’s the opposite.”
Disclaimer: Meta Platforms and Alphabet shares are owned by the Cramer Charitable Trust.
For more analysis, see Cramer’s full explanation below.
Jim Cramer’s Guide to Investing
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