Jim Cramer is a gift that keeps on giving, at least for now. Having emerged as one of the most potent contra-indicators in the current market cycle, Cramer’s latest flip-flop on Ethereum has added a tailwind of sorts for the cryptocurrency’s bulls. The overarching question is: should you bite? The CNBC host is often touted as a veritable alpha-generating machine, provided that investors do the exact opposite of what Cramer peddles. The underlying thesis is quite simple: Cramer represents the consensus view of the market, and the consensus rarely delivers. In fact, this phenomenon has now been immortalized via the launch of various iterations of an inverse Cramer ETF, such as the one offered by Index One, which is still outperforming the broader S&P 500 index, on a year-to-date basis, by around 10 percent!
— Defi Butt ⟠ (@defi_butt) June 8, 2022 This brings us to the crux of the matter. Back in June, Cramer had pegged a $3,000 target on Ethereum. Incidentally, this development almost perfectly coincided with the contagion in the Decentralized Finance (DeFi) space sparked by the collapse of Terra’s stablecoin as well as a wave of liquidations and margin calls emanating from various corners of the crypto sphere, including Celsius Network’s woes and the recent collapse of the Three Arrows Capital (3AC) hedge fund.
— Squawk Box (@SquawkCNBC) July 5, 2022 So, the question emerges: with Cramer’s previous bullish call on Ethereum utterly decimated, should investors now take the opposite view of his new bearish take? Well, the answer is a bit nuanced. With the recent purge of the froth in DeFi space, coupled with most metrics screaming oversold conditions, Ethereum is certainly primed for a bounce. Moreover, the upcoming “merge” event is sure to introduce additional tailwinds to Ethereum’s bullish thesis. As part of the Ethereum 2.0 overhaul, the Ethereum mainnet is now slated to become a shard on the Beacon Chain, completing the cryptocurrency’s transition to a Proof-of-Stake (PoS) transaction authentication mechanism, which would drastically reduce Ethereum’s energy footprint and attract additional capital from ESG-related inflows. This “merge” event is currently slated for Q3 2022. Nonetheless, Ethereum does face a major macroeconomic headwind: a recession. Given the prevailing high-correlation regime between major cryptocurrencies, including Ethereum, and high-beta, growth-focused US equities, the advent of economic contraction is sure to unleash a fresh wave of selling across the risk universe. However, many analysts now expect a recession to strike in late 2022 or early 2023, leaving significant room for a material bounce in the interim. Would you be willing to take the opposite trade to Cramer’s bearish take on Ethereum? Let us know your thoughts in the comments section below.
