Jordan Belfort, the former stockbroker portrayed in Martin Scorsese’s splashy tale of excess, “The Wolf of Wall Street,” has taken to the press again to warn about rampant “rip offs” and misconduct in Bitcoin markets and increasing regulatory distaste, CNBC reports.
“It’s not that bitcoin’s a scam but its nature allows scams to occur,” he said. “It’s a dark market, you can’t see what’s going on behind the scenes. People dive into that and use it to rip others off.”
Belfort pleaded guilty in 1999 to fraud charges stemming from a penny stock pump-and-dump scam he ran for years out a firm called Stratton Oakmont that he started on Long Island.
At Stratton Oakmont offices, hundreds of brokers in a boiler room setting relentlessly solicit investors by phone with the intent of upselling a particular stock.
Once the chosen stock was sufficiently deployed, Belfort would order a massive, coordinated sell off and rake in resulting profits.
The same behaviour, he says, is present in Bitcoin markets, conduct he thinks could result in the demise of Bitcoin within a year.
“This thing is going to evaporate like a mirage,” Belfort said. “There’s a lot of really honest people who are going to get slaughtered…(in a) bust heard around the world.”
Perhaps mistakenly, Belfort believes that Bitcoin’s ‘anonymity’ gives it the perfect profile to be manipulated from the shadows.
And though manipulation is an undeniable feature of Bitcoin and alt coin markets, Bitcoin has never been entirely anonymous unless special measures like “tumbling” are undertaken. (Bitcoin “tumbling” services allow people to pool their bitcoins with others where they are “mixed” and then returned back in equal amounts.)
In fact, the Bitcoin ledger can be inspected, albeit at considerable expense. People like Ross Ulbricht of Silk Road have been forensically tracked through Bitcoin transactions.
Bitcoin has also proven its utility not just among shady traders and black marketeers but has also been used by individuals hoping to skirt unfair capital controls of one kind or another and by people living in hyper-inflationary economies like Iran, Venezuela, Zimbabwe and Turkey.
Economists like Saifedean Ammous have also pointed out that Bitcoin’s deflationary structure (limited supply) theoretically promotes saving in economies where plentiful, cheap capital has promoted shortsighted and imprudent spending behavior.
Besides the transparent ledger, KYC/AML (know your customer/anti money-laundering) procedures are closing in at exchanges, and a number of expressly anonymous coins like Monero and ZCash could overtake Bitcoin as the shadow coin of choice if they manage to get enough liquidity.
As well, ICOs have proven the preferred stomping ground of outright pump-and-dump scammers of late.
What could definitely affect the valuation (but not necessarily the value) of Bitcoin is the fact that certain markets that were very huge for trading it before, including China, are cracking down hard on Bitcoin and cryptocurrencies now. Multiple scams have given such regimes ample excuse.
If holding Bitcoin becomes a flat out crime in many places, the network might still have utility and appeal, but the price of the coin may not rise profitably because of the fears of good citizens around getting involved.
Bitcoin could then become a matter of principle for the most freedom-minded, and not as profitable as before.
As Belfort does what could be regarded as his rounds of penance, he sees no reason why authorities would be kind to “a peer-to-peer electronic cash system” with the audacity to circulate itself without permission from authorities.
“Central banks don’t want it, they’ve spent all this time trying to stop money laundering, why now allow something that…lends itself to making money-laundering easy?” said Belfort. “I don’t believe there’s any shot in the world they’ll let that happen.”