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In Jordan Belfort's words, "I don't think there's any amount of research that you can do to protect yourself against this ultra-low cap [assets] other than getting in early."
The "Wolf of Wall Street," a former stockbroker notorious for his severe price volatility, Jordan Belfort, has compared low market cap crypto assets to penny stocks. Highly speculative shares from tiny, unheard-of enterprises are called penny stocks. Typically, they either provide enormous returns for investors or severely fail.
Brokering agreements for these stocks contributed to Belfort's rise to fame in the 1990s and a subsequent run-in with the Securities and Exchange Commission (SEC).
On August 27, Belfort said in an interview with Yahoo Finance that these kinds of investments have the “same predictable cycle,” which can lead to large returns but also destroy investors if they don’t cash out at the correct time:
Wow, if you can get your hands on one of those ultra-low cap deals at the proper time, you can make simply tremendous, massive money. On the other hand, you are playing in someone’s playground, and you are aware that they are the house and not you.
He said, “You’re going in there, and you’re probably going to lose.”
In addition, Belfort noted that low-cap crypto assets should never be considered a serious investment and that consumers should only engage in them if they are ready to risk a tiny portion of their wealth.
“I don’t think there’s anything you can do, no matter how many studies you do, but getting in extremely early to shield yourself from this ultra-low cap [assets]. Regardless of whether the management is excellent or poor, the stakes are so minimal that whatever ends up happening will get to the top and then be abandoned by the public.
However, The Wolf of Wall Street also stated that because of their solid foundations, he primarily considers long-term investments in Bitcoin (BTC) and Ether (ETH). He claimed that as the market reaches a more advanced stage in the future, BTC can serve as a store of wealth and an inflation hedge.
He continued, “I just think it’s a matter of time where enough of it gets into the right hands, there’s a limited supply, and as inflation does continue to go and go and go, at some point, there’ll be enough maturity with Bitcoin where it starts to trade more like a store of value and less like a growth stock.”
Belfort is one of many well-known investors who have changed his mind about cryptocurrencies over the past two years, joining the likes of Shark Tank investors Mark Cuban and Kevin O’Leary.
The commodity was the “ideal storm for manipulation” at the time, according to Belfort, who predicted the price of BTC would eventually fall to zero in February 2018. At that time, the market was extremely thin. Additionally, he questioned whether BTC was more than just an investment instrument and said it should be legislated out of existence.
Belfort said he was “wrong” about BTC going to zero in a statement to Yahoo Finance on his change of heart, adding that life is about “constantly adjusting and learning.”
While most of his criticisms remain valid, he claimed that his opinions have evolved due to the increasing popularity of BTC and other cryptocurrencies and the realization that they won’t be completely outlawed.
“The fundamental thing pushing me to be pessimistic on Bitcoin,” he continued, “was the risk that the U.S. will just declare ‘no more’ as China did.”