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Wolf of Wall Street: Small cap cryptos like penny stocks



 Former stockbroker Jordan Belfort, also known as the “Wolf of Wall Street,” compares small-cap cryptocurrencies to so-called penny stocks due to their extreme price volatility.


Penny stocks are highly speculative stocks of small and unknown companies that are priced below $1. Typically, these either make huge returns or they crash and burn up dramatically.


Belfort's rise to fame as a broker in the 1990s, and his subsequent run-in with the Securities and Exchange Commission, was due in part to brokering deals in these stocks.


In an interview with Yahoo Finance on Saturday , Belfort explained that these investments have "the same predictable cycle" that can yield huge returns but can burn investors if they don't exit at the right time:


"In these ultra-low-cap deals, if you catch something like this at the right time, you can make a lot, a lot of money. But then again, you're playing in someone's playground and you know you're not their house, they are the house".

"You get in there and most of the time you're probably going to lose," he added.


Belfort went on to say that people should only invest in small-cap cryptocurrencies if they are willing to allocate a small portion of their portfolio to gambling. He thinks you should never seriously invest in them.


"I think no matter how much you do your research, you can't protect yourself from these ultra-low capitalization assets. You can only get in very, very early. It doesn't matter if there's good or bad management here .They are so low that they end up going up and then when they get to the top people will drop them."


However, The Wolf of Wall Street also noted that he primarily considers Bitcoin ( BTC ) and Ether ( ETH ) for long-term investing due to their strong fundamentals. He stated that he is particularly interested in BTC because it could be a store of value and an inflation hedge once the market matures in the future.


“I think it's only a matter of time before enough bitcoin gets into the right hands. There is limited supply and as inflation just keeps rising and rising and rising it will eventually mature enough that it's more like a as a store of value rather than trading as a growth stock," Belfort said.


From crypto haters to proponents

Belfort is one of many well-known investment professionals who have made a U-turn in crypto over the past few years . In doing so, these people have followed the lead of Mark Cuban and Kevin O'Leary .


In February 2018, Belfort predicted that BTC price would eventually drop to zero . He called the asset a "perfect storm for manipulation" as the market was very thin at the time. He also doubted that Bitcoin can also be used as a means of payment. In his opinion, BTC should be regulated until it no longer exists.


Speaking to Yahoo Finance, Belfort said he was "wrong" when he said BTC would go to zero. Life is about "constantly adapting and growing".


On a related note, the rockin' road is ahead, but here are 5 altcoins that still look bullish


He said while he still stands by most of his criticisms, the increasing acceptance of BTC and cryptocurrencies, and the realization that the sector cannot be banned outright, finally changed his mind.


"My original thesis was the sovereign risk of the US just saying 'this can't be done' like China did. That was the real reason I was so pessimistic about Bitcoin," Belfort said.

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