Should you listen to Cramer when it comes to crypto investing?
- Jim Cramer is a well-known financial personality.
- Cramer recently addressed investing in cryptocurrencies.
- He provided some advice on the amount of money that people should invest in cryptocurrencies.
Cryptocurrency investing has become a popular pastime, with many Americans buying virtual currencies in recent years. This type of investing can be risky, though, so it’s important to make carefully considered choices about when and how to put money into crypto.
Many financial personalities have weighed in on this issue. Jim Cramer is one of them. Cramer is the host of an investing show called Mad Money, he cohosts another show called The Squawk, and he was previously a hedge fund manager.
His financial credentials are clear, and his opinion on crypto investing is worth taking into account, along with the advice of other finance gurus including Suze Orman and Dave Ramsey. Billionaires Elon Musk and Mark Cuban have been known to share their opinions on crypto investing as well.
This is how much money Cramer advises putting into crypto
In 2021, Cramer provided some insight into the amount of money that he believes investors should put into cryptocurrencies. Cramer said: “At the end of the day, I’ve said repeatedly that you can use Bitcoin or Ethereum as a hedge against inflation. Up to 5% of your savings, as a replacement for gold.”
However, Cramer also warned that he believes it’s important to “recognize the very real possibility that the whole investment case for crypto rests on the greater fool theory, you’ve got my blessing to speculate on it.”
This “greater fool” theory essentially refers to the idea that it’s OK to make speculative investments on the assumption someone will one day be willing to pay a higher price for them, but it works only until you run out of “greater fools,” willing to pay more inflated prices.
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Cramer himself has bought cryptocurrencies, but he made clear that he doesn’t necessarily believe they were sound investments or that he was following his own advice and purchasing them to protect against rising prices.
“I didn’t buy Bitcoin or Ethereum as inflation insurance. In all honesty, I was gambling. I was simply gambling on crowd psychology, though, and I have no idea whatsoever why these things went up, except that there are a lot of overenthusiastic people who want to buy high and sell higher,” Cramer commented.
So, while he says it’s OK to put some money at risk, he’s stressed to his viewers that cryptocurrencies are a speculative investment, not necessarily one with a lot of underlying value, and that it’s important to avoid getting carried away by high levels of enthusiasm in the crypto marketplace.
Should you listen to Cramer?
Ultimately, it’s worth heading Cramer’s warning about the possibility that buying cryptocurrency is more of a gamble than a stable investment. However, there are also plenty of reasons to be optimistic about the future of the technology behind big-name coins, including Bitcoin and Ether — and there’s a possibility these assets could earn generous returns over time.
Every investor will need to assess their risk tolerance for themselves, research different coins carefully, and decide how much of their money they’re willing to put at risk with a crypto purchase. While you may decide that amount is more — or less — than the 5% Cramer recommends, you should make sure you have a good mix of assets including plenty of safer investments before putting your money on the line with a newer, more poorly regulated, and largely untested asset class.
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