While financial experts have been debating the stability of bitcoins — a form of digital currency that has taken the market by storm — one famous former Wall Street player has chimed in with an urgent message.
Jordan Belfort, the real-life “Wolf of Wall Street,” warned potential buyers interested in investing in bitcoins that that there was no real value to the currency, calling it a “bubble.”
“I’m certain at the end of the day it will end up close to zero, that’s the bottom line,” Belfort told Fox Business in an interview published Friday.
Bitcoin was created in 2008, and its stock value recently experienced a dramatic spike, as one unit of the cryptocurrency was worth around $1,000 in January 2017, but has seen recent values upwards of $15,000, according to U.S. Consumer Finance.
Bitcoins can be used to buy merchandise anonymously, and because the currency is decentralized, it has no ties to any specific country or financial institution, meaning it’s not subject to regulation.
The currency is stored in a “digital wallet,” which is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money, according to CNN Money.
While buying and trading bitcoin has become a popular craze, Belfort warned that it would reverse itself at some point.
He pointed to the U.S. mortgage market as a prime example of speculators taking something that was “crap” — subpar mortgages — and ramping it up by telling buyers how great it is. The result was that the mortgage market eventually took a major tumble.
“The sentiment will change and (bitcoin) is going to drop so hard and fast,” he said, according to CNBC.
While Belfort didn’t believe bitcoin was necessarily a scam, those interested in putting their “mainstream” money into it should be cautious.
“People are essentially taking these basically worthless instruments and pumping them up with a story that it’s the next great thing,” he told Fox Business. “This is never going to be a mainstream currency, it’s not going to be. There’s too many problems with bitcoin.”
One of those problems, he explained, was that bitcoin was not really being used as a currency, but instead was primarily being used for investment purposes.
Thus, “any bit of buying drives up the price, as there’s only a small amount,” Belfort told Fox Business’ Stuart Varney.
“It’s not that bitcoin is a scam – its that the price is related to nothing in reality,” he explained.
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