Beware of Bitcoin bonanza

Bitcoin appears to be back in vogue, hovering near three-year highs, but Hilary Kramer of Kramer Capital Research warns investors against chasing the cryptocurrency, which has proven it can fall just as fast as it rises. She spoke to Reuters Business Correspondent Conway G. Gittens.

Below is the video transcript.

CONWAY GITTENS: It used to be called Merger Mondays, but maybe they should start calling it medicine Mondays. For three Mondays in a row, stocks have risen on positive vaccine news. And it’s not just stocks. Bitcoin has been moving higher, as well, to a three year high. Well, let’s talk about it all with Hilary Kramer of Kramer Capital Research. Let’s talk Bitcoin– why are we seeing a resurgence in enthusiasm for cryptocurrency?

HILARY KRAMER: Well, cryptocurrencies are very similar in many ways to gold in that it’s an alternative to the stock market. So there is really these two reasons, which are kind of divergent in many ways, Conway. One, of course, is that there’s concern that with more stimulus coming, just the value of the dollar is going to continue to drop, because $7 trillion has already been spent in 2020 on stimulus. And there will probably be another package coming along, which in many ways is, of course, needed, and there are those that are just struggling in our economy in this country. However, it means that the dollar’s undermined. So there’s this demand there.

But it’s also at the same time, a matter of the fact that we invest based on greed and fear. And that Bitcoin, cryptocurrency excitement, a lot of it has to just do with so many new investors who have the time, who are online, and they’re just looking to see where they can make money. And they’re just jumping on the bandwagon. And we all forget so easily the fact that although cryptocurrency will one day be an important and part of our lives, right now, it doesn’t have the security, and there’s a lot of risk involved with cryptocurrency.

But for right now, I just have to say everyone needs to be careful. Please be careful. It has its place, but in reality, if you don’t need to be using Bitcoin, don’t be using it.

CONWAY GITTENS: I don’t want to cut you off, but let’s make a connection, if you can, between what’s happening with Bitcoin and the overall stock market. You mentioned these new investors. So is it that investors are seeing better gains or the better prospect of gains in Bitcoin, and so now they’re moving out of stocks? Or trimming back on stocks and going into Bitcoin?

HILARY KRAMER: Bingo. Yeah, really, Conway, you just hit it. That’s really what it is. It’s just– it’s just looking for the next big hit, the next big move, the home run. That’s it. So now it’s Bitcoin with a short memory of how easy it is to lose money. And that what’s really behind it is, you know, very difficult. There’s not really an asset that you can point to.

CONWAY GITTENS: Right, so let’s talk about– let’s continue to talk about stocks right now. As I’ve mentioned in the intro, you know, the third month in a row we got positive vaccine news, the stock market is up. So what is your feeling between how investors are taking the vaccine news?

HILARY KRAMER: The vaccine news, it’s, like– it’s incredible. It used to be risk off, risk on. Now it’s, like, vaccine on, vaccine off. Now the market is starting to get a little bit fatigued with the vaccine news. You know, the fervor that we had originally two weeks ago, we started with, you know, Moderna news, Pfizer news, you know, today, obviously, it’s the AstraZeneca Oxford news.

The market is starting to look through the data and realizing these are announcements, and there’s a lot that goes into making– you know, into making a vaccine and then getting it into people globally. So my answer here is that the stock market is getting a little bit tired, because of the excitement of vaccine news. And they’re trying to balance the seesaw that’s going on.

On one hand, you have this optimism about a vaccination coming and that, you know, coronavirus will be behind us. And then there’s the other part of this seesaw, which is, oh no, you know, we’re seeing COVID spikes all around the country. We’re seeing hospitalizations at a– at a higher level than we ever had before. So that leads me to yes, you’re thinking, well, where do you invest, right?

CONWAY GITTENS: Yeah. Let me ask you one question. We came in today and found out the Department of Homeland Security said that the airline passenger check ins have gone up, and they are now hitting levels not seen since March. And I’m wondering as an investor, what do you think about the airline sector? Would you touch it?

HILARY KRAMER: I wouldn’t– I wouldn’t try to be what we call cute, right? You know, don’t try to outsmart the market and think, I’m going to get ahead of this, because it’s– it’s not just going to be– we’re going to take three steps back before we take four or five more forward. There’s a lot of concern. I have to believe the epidemiologists. Four out of say they’re not going anywhere. They’re locked down for the holiday. And then one out of five say in order to travel, I’m going to take every single precaution there is.

So I have to believe the, you know, medicine and what they’re saying, the experts. So I wouldn’t try to jump in there. I do still love United Airlines. I think UAL– you know, it’s really the leadership they have and what United Airlines has done, and I love the innovation that the airlines have put into play. But don’t just try to buy the cruise lines simply because there’s a vaccination– vaccine coming. Don’t try to jump in and buy, you know, even some of these top airlines yet. I mean, the time will come.

CONWAY GITTENS: All right, great. Thank you. That’s Hilary Kramer of Kramer Capital Research. I’m Conway G. Gittens, and this is Reuters.