The following text is compiled from the series Twitter Space #DialogueTraders, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X 0
This episode’s guest: Jason Huang, NDV Founding Partner, Twitter @Jhy 256
The logic of “penetration rate” makes Internet investors all in Crypto
Jasons background, in his own words, is quite Web2. As an Internet VC, he worked at China Renaissance Capital and Qiming Venture Partners, and later went to the home office of Alibaba Chairman Joseph Tsai, where he was responsible for all domestic investments.
Jason first bought coins during the ICO boom in 2017, but his understanding of Crypto at the time was still at the stage of a bit like a scam, so he left the market after making a little money.
I got to know Crypto again in depth in 2020 after hearing the “walk” from the big V “Lunch”: Bitcoin is a good long-term asset and should be held for a long time. The logic that successfully “brainwashed” Jason was:
When Alibaba went public, the e-commerce penetration rate in China was 3%. About ten years later, it was 30%, a tenfold increase. At that time, the penetration rate of Crypto was 100-200 million people. With a world population of 6 billion, penetrating to 2 billion should be a simple, replicable and fast process. In fact, the penetration rate of Crypto is only about 600 million people today, so there is still a lot of room for improvement.
Now it is 23 years later. This year, Jason left the family office and founded his own fund NDV. He entered the market when Bitcoin was around 29,000. In about 20 months, he has gained a return of more than 4.3 times, outperforming BTC.
And the trading strategy that Jason used, in retrospect, was actually very simple.
Why $MSTR?
Since founding his own fund, Jason has been adhering to the penetration rate logic, What I buy is called institutional penetration rate.
So they only did one thing in 2023, which was to buy GBTC. Because GBTC was at a discount to Bitcoin at the time, they outperformed Bitcoin at that stage.
After the ETF is passed and the discount is restored, Jason begins to think: after institutions buy the Bitcoin ETF, they will want some configurations that excite them more. What will that be?
The answer is: Crypto-related stocks.
So the options before them were 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 reach a consensus, at least when everyone is just starting to learn Crypto.
However, for companies with fundamentals like Coinbase, many institutions will study its fundamentals and calculate its PE, but it is not easy to buy them. Mining stocks have a different logic. Although in theory small-cap stocks may grow faster, judging from the results to date, this is not true, because once there is more than one mining stock, it is easy to disperse the consensus.
From the perspective of results, we can also see that MSTR has actually outperformed Nvidia, Bitcoin, and many other things.
What do the “big money” in the market care about most?
In Jasons definition, big money ranges from sovereign funds to insurance companies, university funds, endowment funds, and various hedge funds. The penetration rate of Crypto among these people to date may be less than one thousandth.
What big money cares about is nothing more than simplicity, understanding and liquidity.
Therefore, their positions at this stage can only be Bitcoin, or those few stocks, and the more liquid the stocks are, the more consensus they will gather, because big money needs to consider in and out.
“So my logic is very simple: where there is a consensus that is easy to spread, where there is good liquidity, there is likely to be a lot of money pouring in.
In fact, this is also the reason why XRP and SOL have received more attention, especially XRP, which has existed for a very long time, has a huge market value, has excellent liquidity, and there are lawsuits from time to time to catch everyones attention.
Ultimately, finance is a game of supply and demand, so you just look at what the big money is thinking. All those things that require a lot of effort to build a new consensus are not worth gambling on. As long as you have a large position in some of the right assets, you can outperform others.
When will the bull market “peak”?
In fact, Jason’s tweets have verified the accuracy of his judgment of the big cycle trend many times. When thinking about the top of the bull market, Jason still follows the logic of “what the big money is thinking”. He believes that from the issuance of ETFs to now, BTC has risen from 40,000 to around 100,000, and the market has flowed into 30-50 billion US dollars. If it is to rise to 150,000, at least the same amount of money is needed.
Where does the money come from?
Let’s first look at sovereign funds. Basically, only the United States has come out first, and only others will come out with such a large amount of money, or in other words, only the United States can afford it. So Jason believes that in the short term, neither the Federal Reserve nor the Treasury will come out with this money.
The remaining big buyers may only be state governments, because every state government has been discussing this recently. If we estimate that a large state can contribute $2 billion, the 50 states can contribute at least $50 billion to $100 billion in total.
“So if you do a simple math problem, my mental position (top) is around 150,000.”
As for the macro chain data that can be referenced, Jason recommends following Twitter @Murphychen 888.
In addition, Jason feels that todays market is actually very transparent because in the context of the United States dominating the market, they announce the dates of all core events in advance, and there will be no sudden issuance of government decrees, so participants are given enough time to think about whether the market is getting ahead of themselves, whether there is advance gambling, and what the state will be if any event is higher or lower than expectations.
“From a macro perspective, combined with the data on Bitcoin supply and demand, it is actually very clear what kind of story the market wants to tell.”
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, because the four-year selling pressure on the supply side has actually become much weaker, and “once in four years” is more of a strong psychological imprint.
At the same time, long-term money will come in, the market will become more like the US stock market, and various currencies will gradually have their own independent narratives and trends, and will no longer rise and fall in sync with BTC.
Because Jason believes that one of the most important things the Trump administration will do next is to redefine what a token is. Tokens will no longer be securities, or even token dividends and repurchases may be allowed. When these tokens are allowed to have their own distribution logic, they may be able to create their own independent narrative.
“Crypto will be less like the sector rotation of A-shares and more like the strong staying strong of U.S. stocks. The essence is that market participants have changed.”
How to choose a small currency? Don’t look at the fundamentals, just choose the founder
When it comes to trading altcoins, Jason also has a simple selection principle: following the general trend, he only chooses tokens from founders he knows.
“In fact, I think most of the founders in Crypto just cut their profits and leave. So as long as he doesn’t want to cut his profits and leave, as long as he continues to work, you really only lose the opportunity cost.”
As for judging the founder, Jason believes that there is no systematic method to screen out all the good people, so he will focus on one trait, that is, whether they have high growth potential.
Whether he is a very unreliable salesperson or a hard worker, I dont mind either of them. As long as he is growing, as long as he can deliver new insights to me every time, and as long as he actually does it, I think he is a good founder for me.
How to grow continuously? A book, a road, a person
Jason keeps himself improving by admitting his mistakes and learning to be honest with himself. He recommends everyone to read The Road Less Traveled, a book that changed his life and taught him not to blame others or over-punish himself when he makes mistakes.
Admitting mistakes is the beginning of changing yourself. It is awesome to be able to bravely admit mistakes.
Focusing on trading, Jason believes that the way to keep improving is: practice, iteration, and review.
There is a difficult method, which he himself did not do well, but is very helpful for trading. That is to write down the reasons for each transaction and continuously accumulate and review them. This is also a valuable experience he learned from primary investment.
Finally, Jason recommended that the trader he followed was Lunch, who formed a lot of Jasons basic knowledge of Crypto, and Lunch knew what to take and what to give up. At the same time, he also made Jason realize that he was not that kind of genius trader, so he had to think clearly about his advantages in trading and then maximize them.
FC: The way I keep improving is to put money into it.
I also shared with Jason my own ideas and practices on how to keep improving and stay sensitive to new things.
I think that everyone feels differently about the emergence of new things, especially the transformation of potential energy. Some people look at data and research reports, while some people stay in the market. My way of not missing the trend is to put money in it.
The specific method is, the first step is to build a zero fund, follow smart people, smart groups and smart money, add some basic judgments based on the targets they buy, and put money in. If most of the targets have risen, it means that I need to pay attention to this track.
The second step is to set up a 10x fund with more money than the zero fund, and then bet 10x on the leading stocks that emerged from the zero fund. After iterating for a while, I found that this is the way that suits me to keep up with the market rhythm.
Especially now, on-chain transactions are an accelerated version of the cryptocurrency world that you dont have time to study. For example, GOAT fell from 200 million to 100 million US dollars, and it took about four or five days to recover, and then it rose to 1 billion. If you dont start tracking from a market value of several million, you will probably not be able to find this context.
So what I am doing now is to put money in, feel it from the bottom, and then you can make decisions and take positions quickly from the top.
Final Thoughts
In fact, the biggest feeling I get from chatting with Jason is that we are all highly sensitive people, and most people who do trading are probably in this state. The greatest pleasure of trading is to compete with yourself. You don’t need to know too many people, just find some people you are interested in to chat with, it’s very free.
