you most certainly can, sometimes on a laggy server you will not get the option.

Hi bittahaironit,

you can craft rags for a long time already. But you can't craft them from everything. For instance, you cannot craft rags from jackets, pants and hats. But you can craft them from various T-Shirts, bandanas and basically everything which has thin cloth and can be torn by hands.

Alternatively, you can also stop the bleedings by mending your wounds with a sewing kit.

Kind regards,
Johnny