There are different opinions about crypto investments: While some are excited about the future and price potential, others warn about the risks of the young asset class. Stock market guru Jim Cramer has some tips on how investors can act in this area of tension – and what they should not do under any circumstances.
Cramer is not one to beat adventurous price targets for Bitcoin and Co. But he “believes” in the potential of crypto and is also himself invested. “I can not discourage anyone from owning cryptocurrencies. I own Ethereum myself, ”he says in a video of CNBC– “Money Talks” series.
“Crypto should be part of a diversified portfolio,” advises Cramer. He attributes the long-term value to their importance as a decentralized means of payment, which will continue to increase in the future. And in the short term, momentum traders in particular would get something for their money thanks to the large price fluctuations on many coins.
However, there are a few things to consider, especially for investors looking to become active in the crypto market for the first time. It starts with the selection of the coins. Cramer advises betting on Bitcoin and Ethereum. These have the widest user and investor base and “seem to be the most reputable”.
It is also important that investors are aware of the potential risks. “One has to be aware that it is speculative,” the expert said. It also includes the possibility that the bet may not work. As with any investment, strong results in the past are no guarantee of rising prices in the future, Cramer recalls.
No cryptocurrencies on credit!
Investors should consider cryptocurrencies as a speculative portfolio addition and invest “no more than five percent” of their total portfolio value in Bitcoin and Ether. In principle, Cramer also agrees with the widespread advice to invest only as much capital in the crypto market as one is willing to lose.
In this context, the expert also strongly discourages investing in credit in the crypto market. “Borrow money for her house. Borrow money for your car. But do not borrow money to buy crypto.”
The advice is not accidental: speculating with borrowed money now seems to be widespread in the crypto market. A trip on the razor blade, for a total loss can never be completely ruled out, even with large established coins. The collapse of the crypto project Terra is a current and frightening example that has brought some market participants to the brink of economic ruin.
Conflict of interest notice:
The CEO and majority owner of the publisher Börsenmedien AG, Mr. Bernd Förtsch, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that benefit from any price development resulting from the publication: Bitcoin, Ethereum.
The editor-in-chief of the publishing house Börsenmedien AG, Mr. Leon Müller, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that can benefit from any price development as a result of the publication: Bitcoin, Ethereum.
The author has direct positions on the following financial instruments mentioned in the publication or related derivatives that may benefit from any price development resulting from the publication: Bitcoin.
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