Wolf of Wall Street Warns Investors Against Bitcoin
Ex-banker and convicted fraudster Jordan Belfort has issued a warning for investors eyeing Bitcoin – it’s a bubble waiting to burst, and average retail buyers are the ones who’ll end up losing their money.
Belfort, who spent close to two years in prison for money laundering and securities fraud in 1999, following which he penned The Wolf of Wall Street in 2007, referred to initial coin offerings as “the biggest scam ever” earlier this year.
More recently, speaking to CNN Money on the subject of Bitcoin, Belfort said its market was akin to the Wild West:
“There's no regulation on the actual level of Bitcoin itself. Yeah there's futures regulation but the underlying asset is completely unregulated. It's a dark market.”
Bitcoin’s volatility and the unregulated nature of the crypto market have been the two key rallying points for critics.
The cryptocurrency has attracted investors by the hordes as its price has skyrocketed more than 1,800% this year. However, with surging highs come sudden, unpredictable lows, and given that the driving factors behind its ever-escalating price are hard to pinpoint, the cryptocurrency has been dubbed a bubble by many.
The former stockbroker commented on how people were using the success of Bitcoin to orchestrate “massive pump and dumps” via smaller, lesser-known cryptocurrencies, and selling a ‘get rich quick’ vision using Bitcoin as a yardstick.
“I think it's a huge danger right now that people are looking at this as the next great thing. It's a bubble for sure.”
Belfort went on to predict that Bitcoin and other cryptocurrencies will continue to surge for now; however, eventually it’s all going to come crashing down – “it’s almost a guarantee”.
The reason behind Bitcoin’s meteoric surge, according to Belfort, is nothing more than its limited supply, and that is what will ultimately lead Bitcoin to “reverse itself”.
The recent launch of Bitcoin futures by reputable exchanges such as CME and CBOE has been heralded by many as a possible turning point for Bitcoin – a development which will help lower volatility, take Bitcoin mainstream, and establish it as a legitimate asset class.
However, according to Belfort, futures can do nothing for the market of the actual underlying asset. Referring to the tulip mania of the 17th century (one of the most prominent examples of a bubble in the finance industry), Belfort pointed out that for the tulip market, “the beginning of the end” was when tulip futures began trading. Similarly, once Bitcoin futures get going:
“… people short it, there’ll be a squeeze as you can’t deliver it and then it’s just … going to literally crater and the average investors are the ones who’re going to lose the money, not the professionals.”
Belfort is not the first to voice these fears – billionaire investor Mark Cuban has said people should invest in Bitcoin only if they are “prepared to lose money”, while Warren Buffet, the ‘Oracle of Omaha’, has set himself firmly against Bitcoin, labelling it a “bubble” and a “mirage” which has no intrinsic value.
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