Small-Cap Crypto Is Like Penny Stocks, Says Wolf of Wall Street

Former stockbroker Jordan Belfort, colloquially known as the “Wolf of Wall Street”, compared low market cap crypto assets to penny stocks due to their extreme price volatility.

Penny stocks refer to highly speculative stocks priced below $1 from small, unknown companies. Typically, they bring massive returns to investors or crash and burn dramatically.

Belfort’s rise to prominence in the 1990s and its eventual encounter with the Securities and Exchange Commission (SEC) were partly due to brokerage arrangements for these stocks.

During an interview with Yahoo Finance on Aug. 27, Belfort noted that these types of investments have the “same predictable cycle” that can generate huge returns but can also burn investors who fail to cash in at the right time. :

“With these very small cap deals, wow, you get one of those things at the right time, you can make huge, huge money. But on the other hand, you’re playing in somebody’s playground. ‘a, you know you’re not home, it’s home.

“You get there and most of the time you’re probably going to lose,” he added.

Belfort went on to note that people should only invest in low-cap crypto assets if they are willing to allocate a small portion of their portfolio to making bets, and suggested that they should never fall into the trap. serious investment category.

“I don’t think there’s an amount of research you can do to protect yourself from those ultra-low ceilings. [assets], except get really, really early. It doesn’t matter if it’s good management [or] bad, they’re so low that what’s going to eventually come up, it’s going to go up, and then when it gets to the top, people are going to throw it away.

The Wolf of Wall Street also noted however that he is primarily interested in Bitcoin (BTC) and Ether (ETH) over long-term investments due to their strong fundamentals. He said he was particularly interested in BTC because of its potential to become a store of value and a hedge against inflation once the market matures further in the future.

“I just think it’s a matter of when enough is in the right hands, there’s a limited supply, and as the inflations keep going and going, at some point there will be enough maturity with Bitcoin where it starts trading more like a store of value and less like a growth stock,” he explained.

From crypto hater to promoter

Belfort is one of several popular personalities in the investment space to have done a 180 on crypto in the past two years, joining Shark Tank investors such as Mark Cuban and Kevin O’Leary.

In February 2018, Belfort predicted that the price of BTC would eventually fall to zero and described the asset as the “perfect storm for manipulation” due to the tightness of the market at the time. He also questioned BTC’s supposed use case payments instead of just being an investment vehicle, and suggested it would be regulated.

Commenting on his change of sentiment with Yahoo Finance, Belfort noted that he was “wrong” that BTC was going to zero and that life is “constantly adapting and growing”.

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He said that while he stands by most of his criticisms, the growing adoption of BTC and crypto, along with the understanding that the sector won’t be banned outright, has ultimately changed his mind.

“My initial thesis was sovereign risk that the US just says ‘no more’ like China did and that was the real thing that made me really bearish on Bitcoin,” he said. .