An illustration of bitcoin on Euro banknotes.
Nicolas Economou | NurPhoto via Getty Images
CNBC’s Jim Cramer said Wednesday that there’s a silver lining for shareholders amid the big rout in cryptocurrencies.
A major decline in crypto trading markets in the last week has weighed on sentiment in the stock market, and it’s creating buying opportunities for investors, he said.
“We need to accept the beatdown in speculative assets for the greater good of the entire stock market,” the “Mad Money” host said. “This speculative meltdown can temporarily weigh on the entire market, sure, but once the speculators get shaken out, I’m betting it’s a win for the Dow and definitely the S&P.”
Bitcoin, the most widely known digital currency, cratered to near three-month-lows before bouncing from almost $30,000 a coin on Wednesday. Since the 30% plunge in the digital coin, it has rebounded to trade above $39,000 in the evening.
The major stock averages all declined during the session, though they ended well off their lows of the day.
Cramer said the swing in cryptos heavily influenced negative trading in other speculative assets, including SPAC stocks with little or no revenues and the so-called “WoodStocks.”
The WoodStocks are a basket of tech stocks Cramer refers to that are favorites of Cathie Wood, the portfolio manager of the popular Ark Invest firm.
“The people who still have conviction in assets like the WoodStocks or cryptocurrencies or bogus non-fungible tokens or the SPAC-and-scams, they have no discipline whatsoever,” he said.
“When the momentum shifts, your conviction will get you killed. Without the discipline to ring the register periodically, you’re going to experience horrendous losses in this kind of situation.”
Cramer said the decline is why he sold some of his holdings in bitcoin and ethereum near the highs, using the proceeds to buy a farm. The farm has a minimum risk of dropping 10% in value in a single day like crypto assets, he said.
Notwithstanding, Cramer argued that investors will do good by taking some profit in speculative assets and building exposure to stocks that benefit from the current phase of the business cycle.
“In other words, if you want to profit from this speculative breakdown, you dump the Nasdaq stocks that sell at a high multiple to sales… you dump a good chunk of your cryptocurrencies, and especially the non-fungible tokens, which have no secondary market to speak of,” he said.
“Then you take your money and swap into the industrials and the mineral stocks or just the plain ole consumer products companies that have a good dividend” that will work in a booming economy, he advised.