History points to another Happy Christmas for crypto bulls

EasyCrypto’s chief executive Earle Loxton offers a bullish view on where the Bitcoin price is heading over the next year, basing his analysis on the historical trend of price surges every four years as new coins are added to the market. His thesis stems from the belief that during these intervals, the number of fresh Bitcoin created halves with each four-year cycle – reminding investors of the hard supply cap, and thus encouraging accumulation. Fascinating insights on a market whose extreme volatility confuses its supporters and critics. – Alec Hogg

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An edited transcript of the interview with Earle Loxton, CEO of EasyCrypto

Alec Hogg: Bitcoin has had its share of negative press, but it currently stands as the best-performing asset class of 2023, with a 57% increase. The Nasdaq is the next best, with a 40% increase. Last year, Bitcoin fell by 64%, while the Nasdaq fell by 33%. Although Bitcoin is volatile, it has a dedicated following, especially within the business community. Earle Loxton, CEO of EZ Crypto, sheds some light on this volatility and discusses what we might expect from the crypto markets for the rest of this year and into the next. These are incredible statistics; Bitcoin fell by almost two-thirds last year but has regained ground this year with a 57% increase. Investors in Bitcoin have to become accustomed to this level of volatility. It attracts not just long-term investors but also many traders due to its volatility.

Earle Loxton: Absolutely. Since Bitcoin’s inception in 2008, volatility has always been a part of the narrative. Many traders and investors are still learning about crypto and Bitcoin, and they can be easily spooked. When there’s a bit of momentum, it can be similar to glasses on a tray; they might move around a little when tilted, but eventually, they all slide off. We see a highly volatile asset here, and investor behaviour reflects that. A slight hint of bad news can cause a mass exodus, only for those investors to return later. From my perspective, these elements contribute to the market’s significant volatility. Of course, this is advantageous for traders who can time their moves correctly, buying low and selling high.

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Alec Hogg: For someone who believes in the potential of cryptocurrency, timing is crucial for entry into this market. How did you time your entry, and what drew you into it?

Earle Loxton: The first time I became aware of Bitcoin was in 2016, towards the end of a bull cycle. At that point, I hadn’t grasped the cyclical nature of Bitcoin and assumed it would continue to rise. So, I bought close to the peak in 2016. 2017 saw a huge surge, reaching $20,000, plummeting to around $3,500.

I now subscribe to Bitcoin’s four-year cycle, consistent since its inception in 2008. Every four years, we see a bull run, and this cycle is largely attributed to Bitcoin’s halving event. Every four years, the rate at which Bitcoin is distributed to miners is halved, leading to increased scarcity and, thus, increased demand. As a result, the price tends to peak about 15 to 18 months after a halving event, followed by a significant drop.

Regarding timing your investment, the ideal period is the recovery or sideways market following the previous bull run. If you’re looking to take profits, history suggests that would be after the peak, which, if the pattern holds, should be at the end of 2025.

Alec Hogg: That’s some interesting insights you’ve given us there. In hindsight, the best time to invest would have been last year when Bitcoin struggled. It’s performed well this year, but you mention a sideways market, indicating that it hasn’t reached the highs of previous cycles in the longer term.

Earle Loxton: Indeed, the last noticeable dip we observed was around $16,000 between November and December last year. Following that, we experienced a 50% upturn this year. However, we’ve seen the market go sideways in the last two or three months, which could largely be due to the U.S.’s influence on global markets, including the crypto sphere.

The U.S. Securities and Exchange Commission (SEC) has been particularly cautious. They’ve pursued legal actions against several crypto companies, such as Binance and Coinbase, under the suspicion of selling securities. This has sparked debates about what constitutes security in the crypto world. While it’s generally agreed that Bitcoin isn’t a security, classifying other cryptocurrencies like Ethereum remains a grey area.

Every time a legal action becomes public, it shocks the market, causing prices to drop. On a positive note, Grayscale Capital, which runs one of the largest non-ETF crypto funds, has recently won a lawsuit against the SEC. A judge found the SEC’s refusal to convert Grayscale’s fund to an Exchange-Traded Fund (ETF) arbitrary and capricious, lacking proper factual basis. This ruling could signal a softer stance from the SEC as we advance, making it more likely to see a crypto ETF in the U.S. soon.

Alec Hogg: That’s intriguing, especially given the ongoing legal battles and regulatory uncertainties. It’s often said that the crypto community desires regulations for clarity and certainty. Would you agree?

Earle Loxton: Regulation is essential for protecting investors and fostering a secure environment. Scams such as the infamous MTI in South Africa could have been avoided with appropriate regulatory frameworks. It’s a delicate balance, however, because over-regulation can stifle innovation. What we see in the U.S. is problematic; they’re taking legal actions against operators without establishing a clear regulatory landscape. Drafting comprehensive regulations is underway, providing much-needed clarity and investor protection.

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Alec Hogg: EasyCrypto was a trailblazer allowing retail investors to engage with cryptocurrency. For most people, the cost of a single Bitcoin, around $20,000, is prohibitively expensive. However, your platform’s fractionalisation feature allows investments as low as 10, 20, or 30 Rand. How has your user base reacted to the evolving landscape?

Earle Loxton: When EasyCrypto was introduced within the EasyEquities group, we launched a diversified bundle called EC10, containing the top 10 cryptocurrencies by market cap. The response was overwhelmingly positive, and we reached over 100,000 clients in less than six months. Since we’ve only been in the market for one cycle, we were a bit disrupted by the end of the 2020 and 2021 bull markets. Nevertheless, it’s important to note that many of our clients took profits near the market peak. We haven’t seen a mass exodus of clients, but there has been some disinvestment, which is a positive outcome. It shows that our clients were able to capitalise on their investments.

Alec Hogg: That’s quite impressive. It appears that your clients are making informed decisions and reaping the benefits.

Earle Loxton: Indeed, and it’s heartening to see our clients make profits. Many liquidated their investments shortly after the market peak, which is commendable.

Alec Hogg: So, if I understand correctly, due to Bitcoin’s inherent cyclicality, particularly concerning the halving of new Bitcoin entering the market every four years, you’re anticipating another price surge in the next year?

Earle Loxton: Indeed, the next halving is set for 2024, and we’re less than a year away from that event. While there’s no guarantee that history will repeat itself, there’s a pattern suggesting as much, and we have strong reasons to believe it will continue. Based on this thesis, we expect another run-up to begin slightly before 2024, lasting approximately 15 months and peaking towards the end of 2025. This cycle has so far culminated in strong Decembers every four years, much like it did in 2021 and 2017.