Former stockbroker Jordan Belfort, often known as the “Wolf of Wall Street,” has compared low-market-cap crypto assets to penny stocks because of their severe price volatility.
Penny stocks are low-priced, highly speculative shares issued by small, unidentified enterprises. Typically, they either provide enormous profits for investors or fail spectacularly.
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These stock transactions contributed to Belfort’s rise to popularity in the 1990s and his subsequent run-in with the Securities and Exchange Commission (SEC).
In an interview with Yahoo Finance on August 27, Belfort said that these kinds of investments have the “same predictable cycle” that can make investors a lot of money but can also hurt them if they don’t sell at the right time.
If you get your hands on one of these ultra-low-cap agreements at the appropriate time, you may make astronomical sums of money. On the other hand, you are playing on someone else’s playground, so you know you are not the house and they are.
“You’re probably going to lose most of the time,” he said.
Belfort said that investors should only engage in low-cap crypto assets if they are ready to risk a tiny portion of their portfolio and that they should never be considered a “serious” investment.
“I don’t believe there is any amount of study that will protect you from these super low cap [assets], other than entering the market really early.” It doesn’t matter if the management is good or poor, since they’re so cheap, the stock will take its journey up, and then when it reaches its peak, people will dump it. ”
The Wolf of Wall Street said that he is especially interested in Bitcoin (BTC) and Ether (ETH) as long-term investments because of their solid foundations. He indicated that he is particularly interested in BTC because it has the potential to become a store of wealth and an inflation hedge when the market matures.
“I believe it’s just a matter of time until Bitcoin matures to the point where it trades more like a store of value than a growth stock,” he stated.
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From sceptic to supporter of cryptocurrency
In the past few years, Belfort is one of several prominent personalities in the investment industry who have reversed their stance on cryptocurrencies, joining Shark Tank investors Mark Cuban and Kevin O’Leary.
Due to the thinness of the market in February 2018, Belfort projected that the price of Bitcoin would eventually go to zero and labelled the commodity as the “ideal storm for manipulation.” He also questioned the idea that BTC could be used for payments instead of just as an investment vehicle, and he said that it will be made illegal.
Belfort said to Yahoo Finance that he was “incorrect” about Bitcoin reaching $0 and that life is about “constantly adjusting and evolving.”
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He stated that while he still stands by most of his critique, the rising popularity of Bitcoin and cryptocurrencies, as well as the realisation that the industry would not be outlawed, finally swayed his opinion.
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“My original thesis was the sovereign risk that the U.S. would just say ‘no more’ like China, and that was the true reason I was so pessimistic on Bitcoin,” he stated.