EXCLUSIVE: Former stockbroker Jordan Belfort, better known as the Wolf of Wall Street, has described the decentralised finance market as a sector ripe with opportunities but warned against diving into cryptocurrency without caution.
Speaking to Yahoo Finance correspondent Jason Dundas, the controversial former trader said a convergence of boredom, technology and COVID-19 stimulus payments has fuelled a rise in day trading.
And, he added that young traders should keep a close eye on the world of decentralised finance and consider ‘staking’.
Staking is the process of holding funds in a cryptocurrency wallet. It’s considered by some to be one of the easiest and safest ways to make money with cryptocurrency, as the investor will earn rewards in the form of interest and tokens by buying and holding the currency for am amount of time.
It means committing your cryptocurrency assets to a blockchain network, which the blockchain then uses to confirm transactions. Staking is only available for some cryptocurrencies that use a proof-of-stake validation method, rather than the proof-of-work model.
The idea is that by having more investors stake their coins, the blockchain network is stabilised. Different networks and cryptocurrencies offer different rewards, and risks.
Also read: How does Ethereum staking work?
“If you’re really careful, and you know your business, you can get some really high returns right now. It’s not going to last forever but there’s a lot of money to make,” Belfort said.
“It’s complicated, but there are people that are really getting returns in excess of 200 per cent a year right now relatively safely.”
More broadly, however, Belfort urged caution among cryptocurrency investors, saying they should only ever invest what they can afford to lose and be extremely suspicious of social media advice.
He says he scrolls through TikTok and reports all illegitimate cryptocurrency accounts.
“All of these, ‘Doge to the moon’ and ‘Shibu to the moon,’ ‘You have to buy now,’ [accounts] where everything is flashing red - no one f*cking knows what’s going to happen!”
However, he does believe that as cryptocurrency is a “nascent market” there are still major opportunities. Belfort has a significant stake in both cryptocurrencies and non-fungible tokens.
“One of the big advantages that the Goldman Sachs's of the world have had is that they have this monopoly on information and on research… That edge is removed when it comes to crypto, because there are no fundamentals of crypto,” he said.
“It's simply like, who is the most popular girl in school this week?”
“There's a huge opportunity [but] I think you should invest in cryptocurrency only what you can lose.You have to count on crypto cards going to zero. My philosophy is you buy it and say, ‘Well if it goes to zero, I'm okay. But I want to have enough exposure to crypto in case the thesis does work out.’”