“Wolf of Wall Street” Jordan Belfort warns that Bitcoin is in a bubble, and that it is set to see a huge decline in value soon.
Speaking to CNN, Belfort said with the recent launch of futures, investors are shorting Bitcoin in anticipation of its value falling sharply.
Before the bubble bursts, however, Belfort predicts the price of Bitcoin will skyrocket as part of a short squeeze.
When an investor shorts a stock, they believe the price will decline and use financial instruments to “buy back” shares at a lower price and make a profit.
Shorting a stock is basically the inverse of normal share investment, where investors aim to buy low and sell high.
Short sellers aim to “sell high and buy low”. However, there is the risk of a short squeeze when there are not enough sellers of shares.
When short sellers want to exit their positions, many of them will want to buy shares – which can lead to increased demand and higher prices.
After the short squeeze the price plummets, and this is what Belfort predicts will happen to the price of Bitcoin.
“At a certain point it has to reverse itself. There will be a squeeze, because you cannot deliver it [enough Bitcoin to buy], and it is going to crater,” he said.
Belfort admitted there is quick money to be made with Bitcoin, but it requires tremendous discipline.
“If you were the most disciplined person, which can get in and get out [of your investment] there is a short window to make some money.”
He warned this is not human nature, however, as after you make some quick money, you want to make more.
Belfort’s interview on CNN is below.