Those who have been following the Michael Jordaan’s career since he departed as FNB’s CEO know that he seldom makes a wrong move.
He’s backed two South African crypto companies – VALR (a crypto exchange) and DCX Capital, originator of the EC10 Index of the top 10 cryptocurrencies. That’s quite apart from his forays into other start-ups including Rain, Bank Zero and algorithmic-trading fund NMRQL.
Earlier this month it was announced that EasyEquities, owned by JSE-listed Purple Capital, planned to acquire a majority stake in DCX. EasyEquities customers have been able to buy the DCX10 crypto index on its platform for a while, but the strengthened partnership means the fund will be renamed EC10 (EasyCrypto 10).
The EC10 Index holds the top 10 crypto currencies as assets. It works exactly like an ETF or a unit trust which holds a selection of underlying assets in a fund structure. The difference is that this investment instrument is a token, and does not trade on an exchange.
Unlike Revix which has a ‘Top 10 bundle’, giving 10% weighting to each of the top 10 cryptocurrencies, EC10 is weighted by market capitalisation.
This means bitcoin accounts for nearly three-quarters of the EC10 index, with the other nine cryptos making up the balance.
It’s been a fabulous success, with 20 000 users adding EC10 to their portfolios since June 2019.
This is the start of big things for EC10 and DCX Capital. “This partnership will enable DCX to concentrate on developing its resources and internal systems to such an extent that an offering will soon be made to other corporate entities and financial institutions wanting to get some exposure to crypto assets,” says DCX Capital co-founder Earle Loxton.
We spoke to Loxton about his partnership with Jordaan and their big bet on cryptos:
You were a relatively early adopter of crypto in South Africa. What prompted that?
“Both Michael and I are passionate about innovation and new technology and were already partners in some other ventures. We’re great pals and work well together, so starting something in the crypto space was a natural progression for us back in 2018, shortly after the last major rally, and subsequent correction.
“We recognised the potential for blockchain and more specifically cryptocurrencies, to disrupt traditional finance as we know it. Now we’re betting on this potential being fulfilled, and that blockchain and DeFi (decentralised finance) will indeed bring a new dimension to the way people bank, invest, insure and transact.
“Michael, with his ridiculously good grasp on economic theory, does not believe that central banks printing money will end well and believes there’s a good chance of a bright future for bitcoin as a deflationary store of value.
“We do not claim to know which protocol will be the eventual winner, so we’re agnostic in this respect, offering customers exposure to a range of cryptos in a single basket.”
It sounds like you’re negative on the future of banking and money. Where do cryptos fit into this picture?
“I don’t see banks disappearing anytime soon, although I do see that digital-only banks will be taking the lunch of the bigger banks more and more. Banks and for that matter financial institutions in general will have to wake up to blockchain technology and at the very least, cryptocurrencies. Crypto is not going away and banks will not kill it (although I get the impression they wish crypto did not exist).”
Your offering makes it a relatively simple process for someone who knows little about cryptos to get involved. Please explain why this product is structured the way it is (weighted by market cap)?
“Our research tells us that the market sentiment moves between bitcoin and the so-called altcoins on a continuous basis, sometimes favouring the one and then switching to the other. What we clearly noticed was that in bull phases, Ethereum (ETH) and the other coins rise faster than bitcoin.
“Crypto has been in a long-term bull market since inception, so we argue that there will be more bull phases than bear phases. Hence our conclusion that an index representing the 10 largest cryptos by market cap is the most efficient way to capture this.
“We see bitcoin as digital gold. Its unbreakable security, combined with its limited supply, gives it a ‘digital scarcity’ that models out to a very predictable pattern that correlates with its four-yearly halving events (this is when the rate at which new coins of mined is slowed down). Our view is that there is a realistic probability that this pattern is continued over the remainder of the current cycle and for the following four-year cycles thereafter.”
All this signifies the growing maturity of crypto as an asset class, says Loxton.
Perhaps the best way to view the evolution as crypto is to compare it with the internet in 1995, when email was a relatively entirely new phenomenon and the web was a clunky curiosity. The difference is that crypto is evolving at a much faster speed than the early internet.