Former stockbroker Jordan Belfort, known as the "Wolf of Wall Street," has likened low market cap crypto assets to penny stocks considering their extreme price volatility.
Penny stocks are one of the most volatile and risky investments. The nature of these investments is such that they either deliver massive returns for investors or expose them to huge losses. Belfort told reporters that history has shown that these types of investments have a predictable cycle, which can generate huge returns but also burn investors who fail to cash out at just the right time.
Belfort noted that people should only invest in low-cap crypto assets if willing to allocate a small amount of their portfolio towards taking gambles and suggested that they should never take it as a serious investment.
When asked about the risks of investing in ultra-low-cap firms, he said there's no amount of research that can protect you from these risky investments. All we could do is get into them really early before they skyrocketed.
He also noted that he is looking at Bitcoin and Ethereum, but only concerning long-term investments due to them having strong fundamentals.
He said he is particularly interested in Bitcoin due to its potential for becoming a store-of-value and inflation hedge once the market matures further down this road.
In February 2018, Belfort predicted that the bitcoin price would eventually crash to zero and described it as "the perfect storm for manipulation" because there was minimal trading compared to today's volumes. He also expressed his doubts about the use case for Bitcoin instead of just being an investment vehicle and suggested that it will be regulated out of existence.
However, in an interview with Yahoo Finance, Belfort noted that he was wrong about Bitcoin going to zero and life is all about adapting. His change of heart was influenced by the mainstream acceptance and growing number of Bitcoin users, as well as an understanding that they cannot ban cryptocurrencies outright.