Former stockbroker Jordan Belfort, known colloquially as the “Wolf of Wall Street” has likened low market cap crypto assets to penny stocks due to their extreme price volatility.
Penny stocks refer to highly speculative shares priced under $1 from small and unknown companies. Generally they either fetch massive returns for investors or crash and burn dramatically.
Belfort's rise to prominence in the 90s and eventual run in with the Securities and Exchange Commision (SEC), was in part, due to brokering deals for these stocks.
During an interview with Yahoo Finance on Aug. 27, Belfort noted that these types of investments have the “same predictable cycle” which can generate huge returns but can also burn investors who fail to cash out at the right time:
“With those ultra low cap deals, wow you get a hold of one of those things at the right time you can make just massive, massive money. But on the flip side of that you’re playing in someone’s playground, you know you’re not the house, they’re the house.
“You’re coming in there and most of the time you're probably gonna lose,” he added.
Belfort went on to note that people should only invest in low cap crypto assets if they are willing to allocate a small amount of their portfolio to taking gambles, and suggested that they should never fall under the category of a serious investment.
“I don’t think there’s any amount of research that you can do to protect yourself from these ultra low cap [assets], except getting in really, really early. It doesn’t matter if it's good management [or] bad, they’re that low that what's gonna end up happening, it's gonna take its ride up, and then when it gets to the top, people are gonna dump it.”
The Wolf of Wall Street also noted however, that he is primarily looking at Bitcoin (BTC) and Ether (ETH) in relation to long term investments due to their strong fundamentals. He stated he is particularly interested in BTC due to its potential to become a store of value and inflation hedge once the market matures further in the future.
“I just think it's a matter of time that where enough of it gets into the right hands, there’s a limited supply, and as inflations does continue to keep going and going and going, at some point in time there’ll be enough maturity with Bitcoin where it starts to trade more like a store of value and less like a growth stock," he explained.
Amid Dubai moving forward with a new license program for cryptocurrency service providers, local regulators are introducing additional marketing and advertising rules for the industry.
Dubai’s Virtual Asset Regulatory Authority (VARA), the city’s dedicated crypto regulator, reportedly announced new regulatory guidelines on marketing, advertising and promotions of virtual assets on Aug. 25.
In the rules, the VARA referred to all forms of outreach, communications and advertising, dissemination of information, building awareness, customer engagement, investor solicitation and others, the local news agency Gulf News reported.
The guidelines cover all virtual asset-related communications and entities publishing information on Dubai-based media websites, search platforms as well as online and offline publishing channels that target customers within the Dubai market.
The rules reportedly also require all local virtual asset service providers (VASP), including advertising platforms, to ensure factual accuracy and openly demonstrate any promotional intent to avoid misleading potential customers.
The VARA reportedly noted that the new guidelines relate to Dubai’s crypto-focused Minimal Viable Product (MVP) license, stating:
“These regulations specifically address marketing and communications activities, ahead of operationalizing the MVP licensees so that any mass-market information dissemination, and consumer solicitation are designed to safeguard community interests.”
As previously reported, Sam Bankman-Fried’s FTX crypto exchange was one of the first companies to receive VARA’s MVP license through its local subsidiary FZE in July 2022. The license enabled FZE to operate a VASP in the region fully.
VARA’s guidelines came along with Abu Dhabi’s new plans to launch a strategy for blockchain and virtual assets that aligns with the country’s overall economic strategy. On Aug. 25, the Abu Dhabi Blockchain and Virtual Assets Committee held its first meeting to discuss the strategy.
Established in March 2022, Dubai’s VARA is responsible for licensing and regulating all VASPs in the Emirate’s special development and free zones with the exception of the Dubai International Financial Centre. The regulator is known for its ambitious industry regulation plans, purchasing land in the virtual reality world The Sandbox in May.
The decisions made by companies during bear markets play a pivotal role in determining their longevity in the crypto ecosystem. Representing Canadian Bitcoin (BTC) mining firm Sato Technologies, COO Fanny Philip revealed what it takes to survive the bearish loom as the market prepares for the next bull run.
Speaking to Cointelegraph during the Surfin’ Bitcoin 2022 event in France about the impact of bear markets on business, Philip said now is the time for mining companies to build and learn.
Philip further told Cointelegraph about the initial challenges of setting up in the industry despite entering the space during a bull market.
The high demand for miners in the Quebec region of operation, where the company initially set up shop, caused a moratorium on new mining facilities and unfriendly sentiments from the local residents. Moreover, Philip related the global pandemic as a catalyst for “difficulties in sourcing electrical equipment."
Though when asked about the effects of the bear market, Philip had more positive sentiments than negative ones. When asked if bear markets are a good thing, she answered:
“To build? Perfect. Bear market is a built market for us.”
She also commented on the relationship between the price of BTC, mining and purchasing mining equipment.
“When the price of Bitcoin is low, you mine more,” Philip said. “If you have to [purchase] equipment, since it’s linked to the price of the Bitcoin, the price of the equipment decreases a lot."
All of these factors mentioned above help companies in the industry build, and according to Philip, Sato is in the building phase.
This can be seen in the company’s brand new agreement with Foundry Digital LLC (Foundry). The two companies struck a deal that makes it possible for Sato to host up to an additional 4,300 miners at Center One in Québec. All of which will be powered by renewable energy.
Sato uses its mining capabilities to mine a small amount of ETH in addition to its primary focus on BTC mining.
When asked about any strategies to face the upcoming Ethereum Merge, Philip said it's the time to diversify and learn about options.
“What’s going to happen, nobody really knows. That’s why we decided to diversify. Mining is our core business but we develop a lot of applications on top of the Lightning Network."
On an end note, she highlighted that The Merge could be seen as an opportunity to look at all possibilities to build and earn within the Ethereum ecosystem. “It’s all part of the evolution,” Philip concluded.
This Daily Dose was brought to you by Cointelegraph.