More On: Bitcoin
'I can’t tell you not to own crypto; I own ethereum.'
Jim Cramer, host of the CNBC shows "Mad Money" and "Investing Club," "believes" in cryptocurrencies, but only as a risky investment that makes up less than 5% of your portfolio.
Cramer tells CNBC Make It, "I can't tell you not to own crypto because I own ethereum."
Cramer bought it at first so he could bid on a non-fungible token (NFT) at a charity event. He says, "They wouldn't let me do dollars." "I had to buy it with ethereum, so I looked into it and found some things I like about it."
Cramer says that crypto's long-term value "is its timeliness" as a decentralized, peer-to-peer currency that could become widely used over time. He suggests bitcoin and ethereum because they have the most fans and "seem the most real."
He also says that owning crypto can be a good short-term bet that takes advantage of price swings. This is especially true since there are a lot of enthusiastic investors in the space who are willing to "buy high."
But there's a catch: "You have to admit it's a gamble" and know that your bet might not pay off. As with any investment, how well it did in the past doesn't mean it will do well in the future.
The recent drop in the value of cryptocurrencies shows how big this risk is, since there's no way to know how much cryptocurrencies could go down in value. Experts usually tell investors to only put in as much money as they are willing to lose.
Cramer says that you should never borrow money to buy cryptocurrency because of these risks. "Borrow for your house, borrow for your car, but don't borrow for crypto," he says.
Cryptocurrency should also be treated differently than safer long-term investments like blue-chip stocks. "Don't put it in the same class as Procter & Gamble. "It's neither Coke nor Apple," he says.
Cramer says that you shouldn't put more than 5% of your money into crypto or gold, both of which are risky investments.
Even though owning crypto has risks, Cramer says he would never tell someone not to invest because "there have been so many fortunes made in it." He also thinks that a whole new group of people could still make a lot of money in it.
He says, "I'd like that to be you."
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