Forex in this article
Belfort: Bitcoin is not yet an inflation hedge – but it will be in the future
The correlation between Bitcoin and technology stocks is only a snapshot
Belfort recommends buying small cryptocurrencies with a huge upside potential
Jordan Belfort became famous through the Hollywood movie “The Wolf of Wall Street” (2013), in which world star Leonardo DiCaprio played the filthy stockbroker from New York City. After serving 22 months in prison, Belfort is now a financial advisor, author and coach. Belfort, who was originally a self-proclaimed opponent of crypto, has not hidden 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. It is clear that he is not worried about the intensive crypto-sale – he sticks to his positive long-term forecast for the world’s first and largest cryptocurrency.
Belfort: Bitcoin investors need perseverance
Despite his generally good expectations, Belfort recently warned investors not only to have a one to two-year investment horizon in cryptocurrencies as part of “The Crypto Mile” program by “Yahoo Finance”. It is true that investing in Bitcoin “with a little 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 correspondingly. “With an investment horizon of three years or maybe five years, I would be shocked if you did not make any money because the underlying fundamentals of Bitcoin are really strong,” the crypto enthusiast elaborates.
How does the former penny stockbroker justify his firm belief that Bitcoin will definitely provide 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 as a value store and less as a growth stock,” the 60-year-old continues.
Great connection between technology stocks and Bitcoin is “nothing strange”
So far, Belfort, on the other hand, admits that Bitcoin – like the other digital currencies – still correlates significantly with technology stocks. This is symbolized by the similar price movements on 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 were already traded as an inflation hedge, as 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 run, however, he considers the development of Bitcoin to be a popular protection against inflation, which is not only possible but highly probable. The crypto sector, and Bitcoin in particular, is on its way to the mainstream and will become more popular in the long run; 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 special attention to the management of the protocols: “If you do not know who are the owners of a protocol, it is a big problem for me”. Belfort’s second piece of advice is to look at the usefulness 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 crypto projects with ultra-low market value. By investing in projects that are still young, you have the chance to make massive profits. It is best to get started before cryptocurrency IPO of the respective currency. Smart investors will jump in when tokens are offered “in a starting position, in a Serie 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 providing liquidity. For example, a major crypto-launch site is BSCPad, the first decentralized IDO platform on the primary cryptocurrency blockchain, Binance Smart Chain (BSC).
Interestingly, this advice is reminiscent of Belfort’s past career of promoting little-known, highly volatile penny stocks to customers. Like small crypto projects, penny stocks can quickly become capital multipliers – on the other hand, investors must always reckon with the total loss of the money invested. Belfort therefore reminds risk-averse crypto-investors “that you will lose most of your time and should be prepared to lose everything”.
The crypto winter continues
Meanwhile, the weak performance in the crypto market continues. 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 out into a tailspin. In addition, cryptocurrencies such as the total loss of Terra Coins UST and LUNA and the suspension of payments on the cryptocurrency lending platform Celsius darkened the mood 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 $ 68,925. One bitcoin currently costs only $ 20,963 (as of July 17, 2022), but the sharp downward movement from June has meanwhile flattened out. The coming years will show whether Belfort is right and whether the cryptocurrencies will actually develop more stably, ie less volatile. This is a necessary condition to be able to function as a long-term inflation hedge.
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