Wolf of Wall Street compares low cap cryptocurrencies to penny stocks

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  • The only way to make money with low-cap crypto is to get into it really early. No amount of research would pay off, says Jordan Belfort.
  • The biggest thing about low-cap cryptocurrencies is getting out after making good profits. Failing to make a timely exit could burn investors’ cash pretty fast.

Jordan Belfort, very much popular as the Wolf of Wall Street recently spoke with Yahoo Finance sharing his views on Bitcoin and the broader crypto market. In an interesting analogy, the former stockbroker compared low market cap cryptocurrencies to penny stocks.

Penny stocks are basically stocks of small and unknown companies trading under $1.0. These stocks usually are highly volatile which can either fetch massive returns or crash dramatically. Jordan Belfort became a very successful trader in the 90s by trading penny stocks.

During his interview with Yahoo Finance last Saturday, August 27, Belfort said that investments in penny stock/crypto have the “same predictable cycle”. They can either generate huge returns or burn investors’ cash if they fail to make a timely exit. The Wolf of Wall Street said:

With those ultra low cap deals, wow you get a hold of one of those things at the right time you can make just massive, massive money. But on the flip side of that you’re playing in someone’s playground, you know you’re not the house, they’re the house. You’re coming in there and most of the time you’re probably gonna lose.

Jordan Belfort’s interesting take on low-cap crypto

The Wolf of Wall Street said that people should allocate only a small part of their portfolio to taking gambles with low-cap cryptocurrencies. He further noted that these cryptocurrencies should never fall under the category of serious investments. Fundamentals don’t have to play any role while investing in low cap cryptos, he said.

I don’t think there’s any amount of research that you can do to protect yourself from these ultra low cap [assets], except getting in really, really early. It doesn’t matter if it’s good management [or]bad, they’re that low 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.

Coming to fundamentally sound cryptocurrencies, Jordan Belfort talks about Bitcoin (BTC) and Ethereum (ETH). He believes that investors can invest for the long term in such cryptocurrencies. The Wolf of Wall Street says that he’s particularly interested in Bitcoin due to its potential to become an inflation hedge and a store of value. Belfort added:

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.

Belfort’s change of heart for crypto

Jordan Belfort was once a major critic of cryptocurrencies, however, over the last few years, he has had a major change of heart and affinity for digital assets. In February 2018, Belfort said that BTC would eventually crash to zero. He also described Bitcoin as the “perfect storm for manipulation” while questioning its use cases.

However, in his interview with Yahoo Finance, Belfort admitted that he was “wrong” about Bitcoin going to zero. He added life’s all about “constantly adapting and growing”. “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. However, he later realized that the crypto sector won’t be banned outright. This caused him to change his mind.


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