Former US broker Jordan Belfort, known as the "Wolf of Wall Street", has compared low market cap crypto assets to penny stocks due to their high price volatility.
Penny stocks are highly speculative stocks of small and unknown companies priced under $1. As a rule, they either bring investors huge profits, or investors lose everything and remain at a loss.
During the 1990s, Belfort made his fortune brokering penny stock deals.
In an interview with Yahoo Finance on August 27, Belfort said that these types of investments have "the same predictable cycle" that can bring huge profits, but can also burn investors who fail to exit at the right time:
"You can make just massive, massive money,” he said. “Most of the time you're probably gonna lose."
Belfort emphasized that it is only worthwhile for people to invest in low-cap crypto assets if they are willing to set aside a small portion of their portfolio for gambling, and suggested that such investments should never fall under the category of serious investments.
"I don’t think there’s any amount of research that you can do to protect yourself….except getting in really, really early. It doesn’t matter if it's good management [or] bad….that what's gonna end up happening, it's gonna take its ride up, and then when it gets to the top, people are gonna dump it."
The Wolf of Wall Street also said that he is primarily looking at Bitcoin and Ether for long-term investments due to their strong fundamentals. He stated that he is particularly interested in BTC due to its potential to be an inflation hedge when the market will become more mature in the future.
"I just think it’s a matter of time that where enough of it gets into the right hands, there’s a limited supply, and as inflations does continue to keep going and going and going, at some point in time there’ll be enough maturity with Bitcoin where it starts to trade more like a store of value and less like a growth stock," he explained.
Belfort is one of the many popular figures in the investment sphere who has changed his attitude towards cryptocurrencies over the past couple of years. Mark Cuban and Kevin O'Leary have also adjusted their opinion of them.
In February 2018, Belfort predicted that BTC would eventually crash to zero and said the asset was ideal for manipulation in the current market conditions. He also questioned the potential of using BTC for payments.
Commenting on his shift in sentiment in an interview with Yahoo Finance, Belfort noted that he was "wrong" about BTC going to zero and that life is "constantly adapting and growing."
The former broker stated that while he still stands by most of his criticisms, the growing popularity of BTC and cryptocurrencies, and the realization that the sector would not be completely banned, eventually changed his mind.
"My original thesis was sovereign risk that the U.S. would just say ‘no more’ like China did and that was the real thing that was driving me to be really bearish on Bitcoin," he said.
