Jim Cramer warns of Bitcoin crash after ETF disappointment
Jim Cramer, the popular CNBC host and financial analyst, has issued a dire warning about the Bitcoin price, saying that the cryptocurrency is in danger of collapsing after the lackluster launch of the spot exchange-traded funds (ETFs).
Cramer, who hosts the show “Mad Money,” took to Twitter on Jan. 12 to express his bearish view on Bitcoin, which he said had reached its peak and was poised for a sharp decline. He cited the disappointing performance of the spot Bitcoin ETFs, which started trading on Jan. 11, as the main reason for his pessimism.
“Someone’s probably going to try to make a stand here but as we said last night, you can’t have an asset double in value by hundreds of billions of dollars in anticipation of an ETF and then almost no one shows up,” Cramer tweeted.
Nasty beginning to the bitcoin selloff. Someone’s probably going to try to make a stand here but as we said last night you can’t have an asset double in value by hundreds of billions of dollars in anticipation of an ETF and then almost no one shows up
— Jim Cramer (@jimcramer) January 18, 2024
Spot Bitcoin ETFs are funds that directly track the price of the underlying asset, in this case, Bitcoin, by holding a large amount of the cryptocurrency itself. This would provide a convenient and regulated way for investors to gain exposure to Bitcoin without having to deal with the technical and security issues of buying and storing the cryptocurrency themselves.
The Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs for trading in the U.S. on Jan. 10, following a successful lawsuit by ETF issuer Grayscale. This marked a historic milestone for the crypto industry, as the SEC had previously rejected numerous applications for spot Bitcoin ETFs over the years, citing concerns over market manipulation, fraud, and investor protection.
However, the spot Bitcoin ETFs failed to live up to the hype, as they saw low trading volumes and inflows on their first day of trading. According to data from Bloomberg, the 11 ETFs had a combined trading volume of about $200 million and an inflow of about $50 million on Jan. 11. This was far below the expectations of many analysts and investors, who had anticipated a surge in demand and liquidity for the new products.
Cramer had already expressed his skepticism about the spot Bitcoin ETFs on his show the night before, saying that they might be “topping out” the Bitcoin price, which had rallied to a record high of $53,000 on Dec. 31, 2023, in anticipation of the ETF approval. He said that the spot Bitcoin ETFs were “too late” and that the market had already priced in the news.
Cramer’s prediction turned out to be accurate, as the Bitcoin price plunged below the $41,000 mark on Jan. 13, a drop of more than 20% from its all-time high. The cryptocurrency also faced increased selling pressure from China, which announced a ban on all crypto-related activities and transactions on Jan. 12, as well as from the Federal Reserve, which signaled a faster pace of interest rate hikes and balance sheet reduction to combat inflation.
Cramer was not the only prominent figure to warn about the Bitcoin price. Peter Schiff, a well-known economist and crypto critic, also chimed in, saying that the new SEC regulations on Bitcoin would increase its transaction costs and lower its future price. He argued that the spot Bitcoin ETFs would require the issuers to report the cost basis and the fair market value of their Bitcoin holdings to the IRS, which would result in higher taxes for the investors.
Schiff also claimed that the spot Bitcoin ETFs would expose the investors to the risk of theft, hacking, or loss of their Bitcoin, as the ETFs would have to store their cryptocurrency in third-party custodians. He said that the spot Bitcoin ETFs were “a disaster waiting to happen” and that the investors would be better off buying gold instead.
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