The Breakdown - What Jim Cramer Doesn't Get About Bitcoin

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Sunday, October 15th, and that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Hello friends, welcome back to The Breakdown Happy Sunday. Today we are taking a look at two very different takes on Bitcoin from two traditional financial actors. The first comes from Mr. Mad Money himself, Jim Kramer, and to get his take, we're going to go to an essay by Ben Schiller called

Starting point is 00:00:55 Jim Kramer doesn't know Bitcoin. Ben begins, quote, I can't go out with Bitcoin because I can't be in something where Mr. Bitcoin is about to go down big. So said Jim Kramer today live on national TV. The veteran Blowhard, former trader and CNBC host, was talking about hedge investments at a time of inflation and economic turmoil. Now, quick NLW editors note here, I believe that in this segment, the Mr. Bitcoin that Kramer was referring to was SPF. There's a little bit of confusion around it because of that nickname that he gave, but I do think that it's an important piece of information.

Starting point is 00:01:30 Doesn't change the thrust of the piece, as you'll see, but I wanted to let you guys know that. So, back to Ben's piece. Kramer told his audience that they would be better putting money into gold, the traditional safe haven, rather than crypto. He said, the charts suggest you need to ignore the crypto cheerleaders now that Bitcoin's bouncing, and if you seriously want a real hedge against inflation or economic chaos, stick with gold. Bitcoin is currently trading at about 26,000 down from around 28,000 five days ago, and is well off at $68,000 peak during 2021's bull market. But it's up 68% this year,

Starting point is 00:02:02 and the first cryptocurrency is still dominating the market. Recent analysis from CoinDesk indices shows Bitcoin gaining this year, along with Ether, as regulatory pressure puts a damper on altcoins. Moreover, many observers think Bitcoin's prospects have never been brighter. A flood of institutional Bitcoin exchange traded fund applications from BlackRock and others could bring in trillions of dollars to the market, creating an easier and more familiar way for everyday investors to get into the space. Commentators see approved ETFs having a similar impact on Bitcoin, as the investment vehicle had on the gold prices when those ETFs became available in 2004. But maybe Kramer knows something that most Bitcoin watchers don't. Perhaps,

Starting point is 00:02:39 although it could be that Kramer is just over crypto in general. He told CNBC's squackbox that he sold his Bitcoin in 2021 as China cracked down on mining. The SBF trial, currently happening in Manhattan, is sapping crypto's already battered reputation in the public mind, and there are so many other ways for investors to participate in speculation these days beyond traditional stock picking. Other prominent risk investors are more bullish on Bitcoin. Hedge fund manager Paul Tudor Jones told CNBC this week that geopolitical tensions and government debt levels make stocks unattractive at the moment, but gold and Bitcoin are attractive options. The stone-plad case for Bitcoin is that it continues to show resilience as an asset,

Starting point is 00:03:14 a community of hodlers and developers and has technology. The blocks keep coming, despite a million forecasts of its demise over the last decade and a bit since it was created. In doomy times, Bitcoin surely becomes more attractive, and a continued regulatory clampdown on crypto could be good for Bitcoin. After all, it's the only coin that Securities and Exchange Commission Chair Gary Gensler says is not a security and therefore covered by traditional securities law. Dear Reader, you will have to decide for yourself. This is not investment advice. But here's one option. You could do the exact opposite of what Kramer says.

Starting point is 00:03:44 An ETF designed to follow Kramer's stock picks closed in August after little interest in losing investors' money, but an inverse Kramer tracker fund is still in operation. All right, so that's the Kramer side of the coin. We're going to come back and compare in just a minute. But first, let's jump over to a little bit more on what Paul Tudor Jones said. By way of background, Paul Tudor Jones obviously helped jumpstart the last bull market in 2020 with his great monetary inflation thesis. He basically asked his analyst to go out and look at every possible inflation hedge because he was convinced that inflation was going to go up dramatically, and they were surprised to find that they started to have growing conviction around Bitcoin. And indeed, as Ben

Starting point is 00:04:20 wrote in his piece, Paul Tudor Jones was back on cable this week, again on CNBC Squawk Box, and said that he would, quote, love gold and Bitcoin together as a hedge against geopolitical uncertainty. Quote, I think they probably take on a larger percentage of your portfolio than historically they would, because we're going to go through both a challenging political time here in the United States, and we've obviously got a geopolitical situation. Now, host Andrew Ross Sorkin disagreed, saying that he thought that high interest rates, quote, were supposed to be the thing that was actually going to be unhelpful to Bitcoin. Jones basically dismissed this and said that there were a lot of recession trades going on right now, and that ultimately these larger factors that were

Starting point is 00:04:56 driving us towards recession and challenge, were going to be much bigger than those trades, and those led him to liking Bitcoin and liking gold in this environment. So there are a couple things to discuss around this. The first is Kramer. My read on this conversation was less about an assessment of Bitcoin's price prospects, and more about, as Ben put it, frankly, a disgust with the space. Like I said, I think he was referring to SBF when he said Mr. Bitcoin is going to go down, and in that way, I think he's actually kind of a bellwether for how many people are looking at this industry right now. There was a sense immediately upon the collapse of FTCS and the revelation of Sam's incredible fraud that it was likely to set back the industry by years.

Starting point is 00:05:38 I think, frankly, we're seeing that, and I think that the period where there is intense media scrutiny around Sam's trial is going to increase that at least for a while. Now, should there be a guilty verdict that people determine fair and just, and especially if that's combined, with a meaningful return for FTCS creditors, you might start to see the beginning of a shift. But there are just going to be some number of people who, frankly, reasonably write this off as just a moribund, crappy, slees, scam-filled industry that they don't want to touch and they don't want to hear about. I think that's pretty much where Kramer is, and I think there's a fairly large group of people who represents, unfortunately. Paul Duder-Jones, on the other hand, I think

Starting point is 00:06:16 gets something much more fundamental about Bitcoin. I think that what he understands is that as much as gets wrapped up with big crazy stories from the crypto industry writ large, it kind of stands alone as its own phenomenon ultimately. The combination of a fixed supply, mixed with real decentralization, combined with a decade of history, just makes it unlike other financial phenomena out there, including other cryptos. One of the interesting things that some people have noted over the past couple weeks is that as stock markets have tanked, Bitcoin is held relatively consistent. I don't think this is particularly surprising to anyone who knows the Bitcoin space. As traditional finance has come to Bitcoin, its correlation with other risk assets obviously

Starting point is 00:06:57 has gone up. But its correlation isn't perfect. Just because there are a bunch of traditional investors who include Bitcoin in their bundle as a risk asset doesn't negate the fact that there's this huge and ever-growing base of long-term hoddlers who basically aren't going to sell their Bitcoin for any reason. I'm not sure that that group is a particularly deep part of Jones analysis, but I think that it does matter and the proof is in this very consistent process. that we've seen for the last few months. What's more, I think that there is an interesting opportunity. One of the most important narrative moments for Bitcoin this year was that weekend that banks were collapsing, and Bitcoin was running in the opposite direction. Bitcoin's price was actually going up.

Starting point is 00:07:36 Now, it seems to me that that wasn't actually because people were fleeing to the safety of Bitcoin. I think, in fact, there were other market structure things going on, particularly around Binance reallocating some of its funds, but ultimately that doesn't matter. What mattered is that a huge number of people saw headlines from mainstream outlets that said things like, as banks collapse, Bitcoin rises. To the extent that Bitcoin can hold or even rise, in the context of increasing turbulence in traditional markets, it reinforces that narrative, that Bitcoin is built for something different. Those narratives have power. They drive people in. And ultimately, one of the reasons that I think when all is said and done, Sam will be in the dust heap of history as a sideshow,

Starting point is 00:08:16 is that I think Bitcoin's resonance and its long-term durability and its relentless expansion into new types of people is just going to be much more significant than any particular cycle's drama. At least we can hope. Anyways, guys, I hope you were having a great weekend. Appreciate you listening as always. And until next time, peace.

The Breakdown - What Jim Cramer Doesn't Get About Bitcoin

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