Belfort: Bitcoin is not yet an inflation hedge – but it will be in the future
The correlation between Bitcoin and tech stocks is just a snapshot
Belfort recommends buying small cryptocurrencies with enormous upside potential
Jordan Belfort became famous through the Hollywood film “The Wolf of Wall Street” (2013), in which world star Leonardo DiCaprio played the seedy stockbroker from New York City. After serving 22 months in prison, Belfort is now a financial advisor, author and coach. Initially a self-confessed opponent of crypto, Belfort has made no secret of his optimism for Bitcoin for a few years now. Like hedge fund manager Kenneth Griffin, he belongs to the ranks of the most famous crypto bulls. Obviously, he is not unsettled by the intensive crypto sell-off – he is sticking to his positive long-term forecast for the world’s first and largest cryptocurrency.
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Belfort: Bitcoin investors need staying power
Despite his generally good expectations, Belfort recently warned investors not to only have a one- to two-year investment horizon in crypto currencies as part of the “The Crypto Mile” program by “Yahoo Finance”. It is true that investing in Bitcoin “with a bit of luck and a time horizon of 24 months can almost certainly make money”. With a longer holding period, however, the risk of price losses is reduced accordingly. “With an investment horizon of three years or maybe five years, I would be shocked if you didn’t make any money because the underlying fundamentals of Bitcoin are really strong,” the crypto enthusiast elaborates.
How does the former penny stock broker justify his adamant belief that Bitcoin will definitely produce a positive return over a number of years? “There is limited supply and if inflation continues to rise there will come a time when Bitcoin will trade more like a store of value and less like a growth stock,” the 60-year-old continues.
Big correlation between tech stocks and Bitcoin is “no wonder”
So far, on the other hand, Belfort concedes, Bitcoin – like the other digital currencies – still correlates significantly with tech stocks. This is symbolized by the similar price movements of Bitcoin and the technology-heavy index NASDAQ Composite. This coincidence does not surprise Belfort: “I am not at all surprised that this is the case, and it would be more of a surprise if Bitcoin was already being traded as an inflation hedge since it is still in its infancy”. Because: “There is no real institutional ownership of Bitcoin, for example there is no teacher pension fund that owns Bitcoin for a ten-year hedge”. In the long term, however, he considers the development of Bitcoin into a popular protection against inflation not only possible, but extremely probable. The crypto sector, and especially Bitcoin, is on the way to mainstream and will become more popular in the long term; at the same time, however, the supply of bitcoins is not increasing.
Belfort recommends these two crypto investments
Belfort then goes into more detail about two tips for promising crypto investments. First, it is lucrative to bet on protocols with long-term fundamentals. One should pay particular attention to the management of the protocols: “If you don’t know who the owners of a protocol are, that’s a big problem for me”. Belfort’s second piece of advice is to look at the utility of the crypto project. An important question for any blockchain project is whether decentralization is the most effective form – “if the idea works better from a centralized server, I probably wouldn’t get involved,” says Belfort.
Second, the former broker recommends investing a small amount in ultra-low market cap crypto projects. By investing in projects that are still young, you have the chance to make massive profits. It is best to get started before the cryptocurrency IPO of the respective coin. Smart investors will jump in when the tokens are offered “on a launchpad, in a Series A, or in a seed round.” Crypto launchpads, often referred to as IDO platforms, are decentralized exchange platforms for launching new coins, crypto projects and raising liquidity. For example, a major crypto launchpad is BSCPad, the first decentralized IDO platform on the main cryptocurrency blockchain, the Binance Smart Chain (BSC).
Interestingly, this advice is reminiscent of Belfort’s former career promoting little-known, highly volatile penny stocks to clients. Similar to small crypto projects, penny stocks can quickly become capital multipliers – on the other hand, investors always have to reckon with the total loss of the money invested. Belfort consequently reminds risk-taking crypto investors “that you will lose most of your time and should be prepared to lose everything”.
Crypto winter continues
Meanwhile, the weak performance of the crypto market continues. The rising key interest rates ensure that investors have an extremely low risk appetite, which sends particularly volatile assets such as cryptocurrencies or tech high-flyers into a tailspin. In addition, crypto catastrophes such as the total loss of the Terra Coins UST and LUNA and the payment freeze on the crypto lending platform Celsius darkened sentiment around digital currencies.
Bitcoin has lost more than 70 percent of its value since its previous record high, which marked the original cyber currency on November 10, 2021 at US$ 68,925. One bitcoin currently only costs 20,963 US dollars (as of July 17, 2022), but the sharp downward movement from June has flattened out in the meantime. The coming years will show whether Belfort will be right and whether the cryptocurrencies will actually develop more stable, i.e. less volatile. This is a necessary condition in order to be able to serve as a long-term inflation hedge.
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