The following text is organized from a series of Twitter Spaces #DialogueTraders, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X0.
Guest this episode: Jason Huang, NDV Founding Partner, Twitter @Jhy256
The "penetration rate" logic leads internet investors to go all in on Crypto
Jason describes his background as quite Web2. As an internet VC, he has worked at Huaxing Capital and Qiming Venture Partners, and later went to the family office of Alibaba Chairman Joe Tsai, responsible for all domestic investments.
Jason first bought crypto during the ICO boom in 2017, but at that time, his understanding of Crypto was still at the "a bit like a scam" stage, so he made a small profit and exited.
His deeper understanding of Crypto came in 2020 when he was influenced by the prominent figure "Lunch": Bitcoin is a good long-term asset that should be held for the long term. The logic that successfully "brainwashed" Jason was:
When Alibaba went public, the e-commerce penetration rate in China was 3%, and about ten years later it reached 30%, a tenfold increase. At that time, the penetration rate of Crypto was 100-200 million people, with a global population of 6 billion, and reaching 2 billion should be a simple and replicable process. In fact, the penetration rate of Crypto today is only around 600 million people, leaving a lot of room for growth.
Fast forward to 2023, Jason left the family office and founded his own fund, NDV, entering the market when Bitcoin was around 29,000, and after about 20 months, he achieved a return of over 4.3 times, outperforming BTC.
Looking back, the trading strategy Jason used is actually very simple.
Why choose $MSTR?
Since founding his own fund, Jason has adhered to the "penetration rate" logic, stating, "What I buy is called institutional penetration rate."
So in 2023, they only did one thing: buy GBTC. At that time, GBTC was trading at a discount to Bitcoin, allowing them to outperform Bitcoin during that phase.
Once the ETF was approved and the discount was restored, Jason began to think about what institutions would want after buying Bitcoin ETFs that would excite them.
The answer is: stocks related to Crypto.
The options in front of them included mining stocks, Coinbase, and MSTR. After some trial and error, Jason and his team chose MSTR for one reason: the simpler the logic, the easier it is to build consensus, especially at the stage when everyone is just starting to learn about Crypto.
Companies like Coinbase, which have fundamentals, are often studied by many institutions, calculating their PE ratios, making them harder to buy; mining stocks follow a different logic. Although theoretically, small-cap stocks might rise faster, the results show that this has not been the case so far, as having more than one mining stock tends to disperse consensus.
From a results perspective, MSTR has actually outperformed Nvidia, Bitcoin, and many other assets.
What do the "big money" in the market care about?
In Jason's definition, "big money" includes sovereign funds, insurance companies, university endowments, donation funds, and various hedge funds. The penetration rate of Crypto among these entities is likely less than one-thousandth.
What big money cares about is simply understandable and liquid assets.
Therefore, their positions at this stage can only be in Bitcoin or a few stocks, and the more liquid the stock, the more consensus it can build, as big money needs to consider entry and exit.
"So my logic is very simple: where there is simple and easily spread consensus, where liquidity is good, there is likely to be an influx of big money.
In fact, the increased attention on XRP and SOL is also for this reason, especially XRP, which has been around for a long time, has a huge market cap, excellent liquidity, and occasionally garners attention due to lawsuits.
Ultimately, finance is a game of supply and demand, so you should look at what big money is thinking. Anything that requires a lot of effort to build new consensus is not worth gambling on. As long as large positions are in some correct assets, you can outperform others."
When will the bull market "peak"?
In fact, Jason's Twitter has validated his accuracy in judging large cycle trends many times. Regarding the peak of the bull market, Jason still thinks from the perspective of "what big money is thinking." He believes that since the issuance of the ETF, BTC has risen from 40,000 to around 100,000, with 30-50 billion USD flowing into the market. To push it to 150,000, at least an equivalent amount of money is needed.
Where will the money come from?
First, look at sovereign funds; basically, only the U.S. has released such a large amount of money, and others will only follow suit if the U.S. does, or rather, only the U.S. can afford it. Therefore, Jason judges that in the short term, neither the Federal Reserve nor the Treasury will release this money.
The remaining "big buyers" currently visible may only be state governments, as each state government has been discussing this recently. If we estimate that a large state can contribute 2 billion USD, the total from 50 states could be at least 50-100 billion USD.
"So if we do a simple math problem, my target position (peak) is around 150,000."
Regarding macro on-chain data to reference, Jason recommends following Twitter @Murphychen888.
Additionally, Jason feels that today's market is actually very "transparent," as under the backdrop of the U.S. dominating the market, they have announced all core event dates in advance, avoiding sudden policy announcements, which gives participants enough time to think about whether the market has front-run or is pre-gaming, and what the state would be if any event exceeds or falls short of expectations.
"From a macro perspective, combined with Bitcoin supply and demand data, the story the market wants to tell is actually very clear."
Will the four-year cycle still exist?
Regarding future market changes, Jason believes that cycles will still exist, but there will no longer be a four-year cycle, as the supply-side pressure has significantly weakened. The "four-year cycle" has become more of a strong psychological imprint.
At the same time, long-term money will enter, and the market will trend towards being more like the U.S. stock market, with various coins gradually developing their own independent narratives and trends, no longer rising and falling in sync with BTC.
Jason predicts that the most important thing the next Trump administration will do is redefine what a token is. Tokens will no longer be considered securities, or even allow for token dividends and buybacks. Once these tokens have their own distribution logic, they may be able to develop their own independent narratives.
"Crypto will not resemble the sector rotation of A-shares but will be more like the strong outperforming in U.S. stocks. The essence is that the market participants have changed."
How to choose small coins? Don't look at fundamentals, just choose good Founders
For trading altcoins, Jason has a simple selection principle: under the big trend, only choose tokens from Founders he knows.
"Most of the Founders in Crypto, I think, are just here to make a quick profit and leave. As long as they don't plan to do that and are continuously working, your loss is really just opportunity cost."
Regarding the judgment of Founders, Jason believes there is no systematic method to filter out all "good people," so he focuses on one trait: "whether they have high growth potential."
"Whether they are unreliable sales types or diligent workers, I don't reject either, as long as they are growing and can deliver new insights each time, and they are actually doing the work, I think that makes them a good Founder."
How to continue growing? A book, a path, a person
Jason keeps himself progressing by: admitting mistakes and learning to face himself honestly. He recommends everyone read "The Road Less Traveled," a book that changed his life, teaching him that when making mistakes, one should neither blame others nor overly punish oneself.
"Admitting mistakes is the beginning of changing oneself; being able to bravely admit mistakes is very impressive."
Focusing on trading, Jason believes the way to maintain progress is: practice, iteration, and review.
One challenging method, which he himself has not mastered but is very helpful for trading, is to write down the reasons for each trade and continuously accumulate reviews. This is also a valuable experience he learned from primary investment.
Finally, Jason recommends following the trader "Lunch," who has formed much of Jason's foundational understanding of Crypto, and Lunch knows what to take and what to give up. He also made Jason realize that he is not that kind of genius trader, so he needs to think clearly about where his trading advantages lie and maximize them.
FC: My way of keeping progress is to put money in
Regarding how to maintain progress and stay sensitive to new things, I also shared my thoughts and practices with Jason.
I believe that everyone has a different way of sensing the emergence of new things, especially the transformation of momentum. Some people look at data and research reports, while others need to stay in the market. My way of not missing trends is to put money in.
The specific method is: first, build a "zero fund," follow smart people, smart groups, and smart money, and based on their purchases, add some basic judgments and invest money. If most of the assets rise, it indicates that this sector is worth my attention.
Second, invest in a "tenfold fund," putting more money than in the "zero fund," and making tenfold bets on the leading assets that emerge from the "zero fund." After iterating for a while, I found this method suits my way of keeping pace with the market.
Especially now, on-chain trading is an "accelerated version of the crypto circle," where you simply don't have time to research. For example, GOAT dropped from 200 million to 100 million USD, and after about four or five days of washing, it shot up to 1 billion. If you didn't start tracking it from a few million in market cap, you likely wouldn't find this connection.
So what I'm doing now is putting money in, feeling it from below, and then making quick decisions and increasing positions from above.
In conclusion
The biggest takeaway from chatting with Jason is that we are both highly sensitive individuals; most traders are likely in this state. The greatest joy of trading is competing with oneself; you don't need to know too many people, just find a few interesting people to chat with at specific points, and it's very free.
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