“I can’t tell you not to invest in cryptocurrency; I’m a ethereum owner,” says Cramer CNBC Make It.
“It was a charity event, and they would not let me do dollars,” Cramer explains. “I had to buy it in ethereum because I couldn’t bid on an NFT with dollars. So I looked into it and discovered that it has some characteristics that appeal to me.”
Long-term value, according to Jim Cramer, is derived from crypto’s “timeliness” as a peer-peer, decentralized currency that may be widely adopted over time. He suggests ethereum and bitcoin, which have the biggest followings and “appear to be the most legitimate.”
Owning cryptocurrency may also be a good short-term investment that takes advantage of price swings, according to Cramer.
However, there is a catch: you must acknowledge that your wager is “speculative,” and understand that it might not pay out. Past performance isn’t necessarily indicative of future returns, as with any other investment.
The present drop in the cryptocurrency market demonstrates how dangerous this risk is, since there’s no telling what price cryptocurrencies may fall to. This is why experts generally propose that investors only invest as much money as they can comfortable lose.
The dangers associated with these investments have prompted Cramer to advise that you should never borrow money to participate in cryptocurrency. “Borrow for your house and car, but not for crypto,” he says.
While cryptos are an amazing investment option, they should not be compared to safer long-term blue-chip stocks. “Don’t put it in the same class as Procter & Gamble. It’s not Apple or Coca-Cola,” he cautions.
Allocating 5% or less of your assets to crypto, as well as investing up to 5% in gold, which is another speculative investment, is Cramer’s advice.
Despite the inherent dangers of crypto ownership, Cramer claims he would never discourage investors from investing because of all of the money that has been made in it. He also thinks it’s conceivable for a new generation to still make millions in it.