Recognized financial expert Jim Cramer discussed cryptocurrencies and shared his advice on investment. The legendary stockbroker gives some advice on which projects new investors can choose.
Jim Cramer discusses the amount to be allocated to his crypto portfolio
On how much of their capital should investors devote to cryptocurrencies, Cramer said:
At the end of the day, I’ve said over and over that you can use Bitcoin or Ethereum to hedge against inflation. Allocate 5% of your savings to cryptocurrencies instead of gold.
big fool theory
Alongside his explanations above, he touched on the idiot theory. The “bigger idiot” theory essentially refers to the idea that it is okay to make speculative investments based on the assumption that someone will one day be willing to pay a higher price for them, but this only works until the “bigger idiots” are gone. Cramer is known to be a crypto investor, but says he doesn’t believe these are sound investments or that he followed his own advice and bought it to hedge against rising prices:
I did not buy Bitcoin or Ethereum as inflation insurance. To be honest, I was gambling. Still, I was just gambling on the psychology of the crowd, and I have no idea why these things are escalating, other than there are a lot of over-enthusiastic people who want to buy high and sell high.
Therefore, while Cramer said it was okay to risk some capital, he stressed to his audience that cryptocurrencies are a speculative investment, not an investment with a lot of fundamental value, and it is important not to get carried away by high enthusiasm. In conclusion, it is worth mentioning Cramer’s warning about the possibility that buying cryptocurrencies is more of a gamble than a stable investment. That said, there are many reasons to be optimistic about the future of the technology behind big coins, including Bitcoin and Ethereum, and these assets are likely to generate generous returns over time. Given this possibility, Cramer’s recommendation is to dedicate 5% of savings to cryptocurrencies instead of gold.