Jim Cramer, well-known host of the TV show “Squawk on the Street” as well as one of Bitcoin’s biggest detractors, has suggested that investors should ignore the main cryptocurrency and prefer gold instead.
However, the traditional commodity does not seem to be having a better price action than Bitcoin, and since the beginning of the year it is gaining about 4.3% while the cryptocurrency is registering +55%.
Moreover, volatility aside, the two assets could also be highly correlated with each other in the coming months.
Is Jim Cramer right or should we ignore him and his talk show lines in preference to Bitcoin?
Let’s look at this in the article
Summary
Jim Cramer to investors: buy gold and not Bitcoin
JIm Cramer, a famous TV personality and former hedge fund manager in the United States, urged investors to beware of Bitcoin and prefer gold instead during an episode of “Squawk on the Street” he hosted.
The latter is a TV program that has been airing on CNBC since 2005, covering financial markets and trading with great humor and joking tones. Squawk on the Street follows the first 90 minutes of the opening of Wall Street markets and deals with various different topics each day.
In one of the latest episodes, Jim Cramer confirmed his anti-crypto stance by openly saying that investors should “ignore Bitcoin and buy gold instead.”
His statement has been taken with a grain of salt by the crypto world’s various supporters, considering also that typically when Cramer speaks ill of Bitcoin, the coin registers a bullish rally as timely as a Swiss watch.
Hoping that Cramer’s prophecy came true this time as well, many users on Twitter commented on his statement by being ironic about a possible “bottom signal” and mocking him as a freak.
After the harsh words hurled against Bitcoin, it came to light that an ETF “LJIM” which tracks financial stocks chosen by Jim Cramer himself, will be closed and liquidated permanently on 11 September 2023 due to heavy losses in the market.
The perfect timing with which these two pieces of news intersected with each other has helped to create a circus-like air around the figure of the TV presenter, already hailed in his own right by individual investors who have mistakenly followed some of his directions in the past.
Cramer just can’t seem to get one right.
BTC vs XAU: correlation and market performance
Setting aside the jester persona played by the legendary Jim Cramer during his shows, let’s see if it really might be a good idea to devote a higher allocation of one’s portfolio to gold rather than Bitcoin.
Granted that these are two totally different asset classes with volatilities that are not comparable, we can compare the historical performance of one and the other to get an idea of which one has provided a better return on investment.
Since the beginning of the year, Bitcoin has been gaining about 55%, albeit in the face of the last heavy drop last week, while gold is only registering +4.3%.
If we look at the last 3 years, since August 2020, XAU has been losing 2% against the dollar while BTC is around + 130%.
Taking as reference one of the best times to buy the commodity, i.e., January 2016 (the month in which the bottom was touched after a 5-year descent), gold posted an excellent +81%, while Bitcoin recorded an astounding +5900%.
On the performance front, there is no doubt as to which asset is the best best asset of the last decade, and Jim Cramer cannot disprove it since it is the charts that speak.
It is also worth mentioning that Bitcoin and gold are often correlated with each other at the level of movements in the markets, and so abandoning the former asset to focus only on the latter might be foolish if not justified by reducing exposure to volatility.
In particular, looking at Glassnode’s data, we can see that in April, May, and June 2023 we witnessed one of the highest periods of correlation between the two assets, culminating in the early days of July.
After a month of decorrelation in which Bitcoin experienced a price rally in conjunction with the various applications to the SEC of a spot ETF for the cryptocurrency, here we seem to be returning to a similar trend phase with gold.
Since August, the correlation index has returned to a situation where both digital and physical gold have lost percentage points in the markets.
