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Institutionally Supported Cryptocurrency Will Overtake Bitcoin, Says Wolf Of Wall Street



De Silva

He has a checkered past, but Jordan Belfort understands a thing or two about money. Today, he offered his thoughts on the bitcoin craze.

On September 27, 2017, The Street shared Jordan Belfort’s thoughts on cryptocurrency. In his assessment, bitcoin is not a great model. “Being backed by nothing other than a program that creates artificial scarcity, it seems kind of bizarre to me that it really could ever be sustainable forever,” said Belfort. His concern echoed a common refrain about bitcoin’s lack of formal backing and spoke to the absence of real-world applications on the bitcoin blockchain. Basically, what is bitcoin useful for other than as a socially contrived store of value?

Belfort’s name might sound familiar to movie buffs. Immortalized in Martin Scorsese’s 2013 film, “The Wolf of Wall Street,” Jordan Belfort is the disgraced founder of Stratton Oakmont, an over-the-counter brokerage that defrauded shareholders during the 1980s and 1990s. Belfort is keenly aware of pump-and-dump schemes and swindles, having served 22 months in jail after pleading guilty to securities fraud and money laundering (side note: Belfort’s initial sentence was reduced because he sold out his business partners by wearing a wire).

Although the bulk of his financial career occurred close to 20 years ago, many of the principles Belfort learned remain the same today. Only the names and the faces have changed. It’s hard to establish credibility for a man who made a killing by falsely hyping penny stocks, but maybe his experience can shed some light on the alleged bitcoin bubble.

 “Sooner or later, a central bank or a consortium is going to introduce their own cryptocurrency and that is what’s going to take hold,” he predicted. Belfort made no mention of blockchain-based applications or cryptocurrencies with more potential utility, like Ether.

What Belfort really worries about is hacking. People need confidence in the safety of their holdings, and events like the disastrous end to MtGox shake the foundations of bitcoin and unbacked cryptocurrency. After an exchange breach or even a missed keystroke, what recourse do investors have without an institution like the Federal Deposit Insurance Corporation to offer protection?

At least for Ethereum, the now-famous White Hat Group was able to react after The DAO hack. For now, financial defense of cryptocurrency capital remains virtually impossible. Many investors are waiting for the day when a government (or company) is willing to insure their cryptocurrency holdings. But, given the volatility, which has been acknowledged by ex-hedge fund manager Michael Novogratz, it’s hard to imagine any institution assuming liability for a cryptocurrency that it doesn’t issue or otherwise control. Perhaps, cryptocurrency loans could make digital asset insurance more palatable.

In all, Belfort has removed himself from the bitcoin ecosystem. He claims that he has not purchased – and has no plans to purchase – any bitcoin. “There will be a time when everyone is freaking out about bitcoin and dumps it, and God knows what’s going to happen,” he said ominously. “Things go artificially up very, very high, and they go artificially down.”

Matthew De Silva

Matthew is a writer with a passion for emerging technology. Prior to joining ETHNews, he interned for the U.S. Securities and Exchange Commission as well as the OECD. He graduated cum laude from Georgetown University where he studied international economics. In his spare time, Matthew loves playing basketball and listening to podcasts. He currently lives in Los Angeles. Matthew is a full-time staff writer for ETHNews.

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