Editor | Wu Says Blockchain

In this issue, we have a conversation with Jason Huang, founding partner of NextGen Digital Venture (NDV), discussing the origin, development, and investment strategy of NDV. NDV is a compliance platform serving traditional financial institutions in Asia, established in 2023, which uses stocks as a vehicle to assist traditional financial institutions in crypto asset allocation and provides investment solutions related to crypto assets. The first phase of NDV's fund (from March 2023 to February 2025) operates under a compliance framework, achieving a cumulative return of approximately 275.5% and completing an orderly liquidation; during the same period, it outperformed Bitcoin with a positive excess return of about 67.3 percentage points (past performance does not guarantee future results). Relevant performance can be queried on Bloomberg's paid terminal, code: LSQNEXI. The second phase of the NDV fund has now started subscription, continuing to focus on crypto asset-related targets, primarily using stocks, alongside equity allocation.

In the interview, Jason shared the background of the NDV fund since its establishment in 2023, particularly its unique insights into the crypto asset market formed by combining traditional financial experience, and explained how the fund enters the crypto asset field through stocks. Additionally, the program discussed the fund's investment results, how it achieves coverage of crypto assets through traditional financial means such as stocks and options, and how it conducts risk management and asset allocation amid market volatility. Jason further disclosed the strategic adjustments of the second phase fund, explaining how to optimize investment direction based on different market cycles and providing forward-looking judgments on potential market corrections and structural opportunities.

From Grayscale Trust to Treasury Stocks: NDV's Entry Path

Colin: Jason, could you first introduce the origin of this fund, why you chose this strategy in the last cycle, and what results you achieved?

Jason: The starting point of NDV was a conversation between Christian and me at the beginning of 2023 — at that time, we observed that while there were rich primary and secondary strategies, the institutional path of "entering crypto assets through stocks" was still relatively rare; this happened to align with our capability circle and compliance requirements. I previously worked at Mr. Cai Chongxin's family office (Blue Pool Capital), responsible for investments in China. I noticed that the crypto heat in Hong Kong had already experienced an upward cycle in 2022, and family offices were researching entry; the regulatory side was also advancing the rules framework, leading us to judge that the window for traditional financial money to enter crypto had arrived.

At that time, the FTX incident had just occurred, and we believed that "orderly bringing traditional funds into crypto" was a significant opportunity. Moreover, from a traditional financial perspective, I thought that for an institution/family office, directly opening an exchange account (like Coinbase or Binance) after the FTX incident would often encounter significant resistance in internal compliance processes, which would take a long time. Institutional investors, after the incident, place greater emphasis on audit availability, custody security, and process completeness. In terms of entry barriers and compliance feasibility, stocks better meet the demand.

In the initial stage, we reallocated to GBTC (Grayscale Bitcoin Trust, equivalent to holding Bitcoin in stock form); after the ETF was approved, we gradually shifted to high Beta targets like MicroStrategy (MSTR) and Coinbase (COIN). Therefore, we were fortunate to benefit from two major waves of dividends. Ultimately, we feel the results are quite pleasing, with the first phase fund completing liquidation and exit in about 23 months (from March 2023 to February 2025), achieving a cumulative return of approximately 3.75 times.

We were lucky to have aligned with the current financial trends and the broader direction of crypto development. The industry's capital structure is gradually shifting from "native crypto capital dominance" to "Wall Street institutional capital dominance." For people on Wall Street, the easiest way to enter crypto is through stocks. A few months ago, we thought there were only a few stocks worth paying attention to, but in recent months, treasury-type companies like Bitmine and Sharplink have gained popularity; to some extent, the risk appetite for "altcoin rotation" is spilling over into U.S. treasury stocks. I now have some doubts about whether there will be an altcoin season in exchanges in the future.

Second Phase Fund Launch: AUM Exceeds $100 Million

Colin: Has your second phase fund been established now?

Jason: Yes, it has been established, and our total AUM has exceeded $100 million.

Colin: And have you already started investing, or are you still in the research phase?

Jason: The second phase started building positions at the end of May. Due to the pace of KYC and other compliance processes, our initial coverage of the market around $75,000 was limited; subsequently, we steadily built positions in the $106,000–$107,000 range for BTC, and our current paper profit is about 20% (subject to market fluctuations, not guaranteed).

Colin: Is there any difference in your current investment strategy compared to before?

Jason: I think the only difference is that the first phase was a long-only structure, mainly going long. The second phase has added moderate shorting and hedging tools in the terms, aiming to control net exposure volatility. At the same time, I have left a small opening in the fund's terms, mainly because I still hold certain expectations; if the U.S. regulatory path further clarifies institutional holdings of tokens, token investment may become a non-linear investment opportunity, and we hope to reserve a small proportion mechanism to seize potential opportunities. I generally try to place money in less crowded areas, and we are also researching some primary projects counter-cyclically, choosing to allocate when valuation and liquidity match. We focus on crypto-related stocks, not limited to the Bitcoin chain. Recently, the market focus has shifted more towards the Ethereum ecosystem.

Colin: Will you also participate in some Ethereum token-stock project investments?

Jason: Yes, under reasonable valuations. We start with quantifiable pricing and only enter when discounts, liquidity, and safety margins are met; we also preset exit disciplines. We will tilt our positions towards those significantly below the market average price or their rightful price. After all, our first pot of gold came from GBTC, which was a discount on BTC. Therefore, we like all discounted assets facing mature markets. We evaluated the discounted SOL claims/shares in the FTX asset package but ultimately did not execute.

Colin: Did you not buy at that time? Many institutions in Hong Kong were buying in that direction, and some of our friends participated.

Jason: In the end, we did not buy, mainly due to time and energy constraints; after all, it was not focused enough to run two funds simultaneously in the early stages of entrepreneurship. Here, I want to explain my investment logic; I tend to consider issues across asset classes because I have previously worked in a family office, which means I have seriously looked at primary investments, secondary investments, and being an LP. So sometimes when primary assets are cheap, we are significantly willing to invest in primary. Other times, when the secondary market is clearly more discounted than the public market, we are willing to buy secondary. The underlying principle remains "valuation-driven, disciplined trading," essentially buying undervalued assets and exiting after valuation recovery. Investors, regardless of the industry, ultimately look for sufficient patience and effort to hold on until asset prices are cheap while maintaining enough capital. Therefore, our daily adjustments and refinements are focused on this.

From Phase One to Phase Two: Strategy Upgrade and Differences

Colin: The time and space of your first and second phase funds may be a bit different, as your first phase fund was during a transition from a bear market to a bull market. Are you concerned that the current market may gradually peak, or are you uncertain whether your predictions might shift towards a bear market at some point?

Jason: Yes, there is a saying, "Never short your own country," so when optimistic about the industry, try not to short it. We no longer mechanically apply the "four-year cycle" but focus more on the new rhythm driven by institutional capital under "U.S. stock correlation." Bitcoin's pullback and volatility may change due to the current influx of Wall Street participants; Wall Street participants do not use leverage, and with Bitcoin's market cap being higher today, the consensus is stronger, making it more stable and the game more fully realized. Today, I view this industry more based on Wall Street pricing, which will have a very high correlation with U.S. stocks.

In the past, the volatility amplification factor of BTC to the Nasdaq was about 3 times; currently, we lean towards a judgment range of 1.5–2 times. Historically, a 20% to 30% drop in the Nasdaq is normal in any U.S. stock cycle. So my current expectation is that in a downturn cycle, Bitcoin could drop 30–50%, but this assumption is based on the premise that it has not yet peaked. Earlier this year in January, we wrote an article predicting that Bitcoin would reach $120,000 to $150,000 before Q2, and it eventually broke $120,000 about three weeks later. Although late, it was close. I believe a bull market does not signal a peak because the peak is definitely bought by the most irrational people. However, from the overall valuation of U.S. stocks, we still insist that "a bull market does not signal a peak," while based on valuation and correlation, we are orderly reducing aggressiveness and increasing defensive weight.

Colin: On the other hand, you mentioned you are also looking for some primary opportunities, which may be more related to listings, as they may have a prospect of going public.

Jason: Yes, regarding primary projects, I will firmly evaluate primary opportunities using the strictest PE approach: 1) Long-term holdable business quality; 2) Clear listing/exiting path; 3) Reasonable liquidity discount. However, there are not many such targets; globally, very few currently meet the above three criteria, expected to be in single digits.

Colin: Understood, your current close should still take a long time; do you have a plan?

Jason: We are a licensed hedge fund in Singapore, and we open subscriptions/redemptions every month (subject to the fund documents). However, investors have a minimum subscription threshold and lock-up period. Currently, we have three batches of investors: the first is entrepreneurs from the Peking University alumni circle, as both Christian and I are from Peking University, and the alumni relationship adds some trust. The second batch consists of family offices of successful Web2 entrepreneurs, mainly from internet companies, pharmaceutical companies, gaming companies, technology companies, etc., where founders want to allocate some funds to crypto. Now, we are also gradually starting to have some American investors, like some large family offices of hedge funds in the U.S. who are our investors; they understand what we are doing and recognize our professionalism in this field. To be honest, our LPs are relatively traditional. They do not go all in on crypto assets; they only see it as part of their asset allocation. This is actually a good thing, as they will not be particularly nervous due to short-term fluctuations.

Ethereum Treasury Trend: Bubble or New Trend?

Colin: What do you think about the currently popular Ethereum micro-strategy companies?

Jason: Essentially, it is a trading vehicle for a "treasury narrative," and the current market is willing to pay a premium for this narrative. They are also helping crypto reach users more efficiently. But why is there such a high premium? I believe each company has its own reasons behind it. Taking MSTR as an example, it uses convertible bonds to indirectly gain BTC exposure by bringing in traditional bond funds, and the premium in between is borne indirectly by the buyers of the convertible bonds; while some ETH-related treasury companies are more inclined towards ATM (At-the-Market) issuance, catering to retail investors' preference for ETH. Therefore, the premiums and market spaces of the two are actually quite different. Such high premiums are difficult to maintain in the long term, depending on refinancing efficiency and the sustainability of the balance sheet.

Colin: So from your perspective, you don't think these Ethereum micro-strategy companies will be as enduring as MicroStrategy?

Jason: It's still hard to say. My view is relatively conservative, and I prefer to look further ahead. MicroStrategy two or three years ago could not foresee the future either; things are done gradually. But you cannot judge the current mindset of all the treasury companies participating in Ethereum, especially those early investors. After all, from the treasury to today, their stock holdings have suddenly gained several times in floating profits. It is difficult to predict whether the end of the lock-up period or a market turn will trigger a stampede among original shareholders. However, one thing is certain: all of this is beneficial for the Ethereum market because these treasury companies will not sell in the visible future. Therefore, in this game, what to choose can still find some certainty. I tend to gamble less.

Colin: So you would prefer to wait? Can you predict what the top prices for Bitcoin and Ethereum might be in this cycle?

Jason: Haha, it's not entirely about waiting; it's more about executing discipline and finding the investment opportunities that suit me best. To be honest, I personally am not very willing to predict prices because, operationally, as a secondary fund, we are more focused on responding to market changes. As I said earlier, a bull market does not signal a peak.

As for prices, I believe there are many influencing factors. Bitcoin rose from $40,000 to $100,000, costing about $100 billion. This $100 billion was mainly driven by ETF and MicroStrategy buying. Next, the incremental buying demand from $100,000 to $150,000 may be significantly higher than in the previous phase. Without an equivalent amount of incremental funds (like large institutions/long-term funds) to support it, upward momentum will need to be exchanged for time.

Christian: Pension funds have been mentioned a lot recently, but I haven't looked into it specifically. What do you think about the views on pension funds?

Colin: Some opinions suggest that the investment process for pension funds will be relatively long because they cannot immediately invest in such high-risk assets. I've seen similar views.

Jason: I focus more on "verifiable actual net inflows" rather than just expectations; trading revolves around changes in supply and demand and capital preferences. I think the changes in all capital markets now, not just in the crypto field, are more driven by supply and demand. For example, when Alibaba's stock price had a PE of 40 or 50 times, no one thought it was expensive. Now that it has dropped to an 8 times PE, and after excluding cash, it is 5 times PE, no one thinks it is cheap either. This is all due to changes in capital preferences. Therefore, I believe the preference for capital towards crypto is already very high. From some institutional research, the current "crowded trades" include AI, shorting the dollar, gold, and crypto, indicating that risk appetite remains high, but marginal crowding is also increasing.

Colin: Right, I think your estimate is still relatively conservative. You believe it will be somewhat difficult for Bitcoin to exceed $150,000, right?

Jason: I am thinking about the future one-year time cycle based on the current actual situation. If the market provides more new information, I will adjust my views.

Colin: What about Ethereum?

Jason: In the next year, if BTC experiences a 30%–50% pullback, I believe it will be the best buying opportunity (not a prediction, just an internal risk assumption). As for Ethereum, ETH has greater volatility elasticity and is harder to anchor in a range, but "breaking previous highs" has the conditions to occur within the next year [shortly after this interview, ETH's price has already broken previous highs].

Colin: Like now with Tom Lee or these Ethereum micro-strategy companies, no one expected this. A few months ago, everyone was criticizing the Ethereum Foundation for selling a few today and a few thousand tomorrow. But then these companies came in and bought all the Ethereum from the Ethereum Foundation without any issues. This was indeed completely unexpected.

Jason: The current scale of staking exit queues is not small (around a billion dollars), so we need to pay attention to the short-term elasticity on the supply side.

Colin: But the market is constantly iterating.

Jason: Yes, it's hard to predict. I think the final peak will be traded out because it ultimately comes down to supply and demand. It needs to be considered in conjunction with technical analysis, capital flow, and on-chain data.

NDV: Cautiously Moving Forward in a New Cycle

Colin: Will you look at some mainstream altcoins or their related companies' strategies besides Bitcoin and Ethereum?

Jason: Very rarely. Our principle is to only invest in things that have good liquidity, transparent information, and that we can understand. There are thousands of coins on the market, and we don't touch 99% of them. It's not that they are bad; it's that we don't understand them. I learned one thing while working at Blue Pool: don't try to earn all the money, just earn the money within your capability circle. Investing is not purely a contest of knowledge; there are many opportunities and temptations in the crypto market. We stick to a few targets that we understand and do them repeatedly. Boring but profitable.

Colin: Do you pay attention to some dynamics in Hong Kong stocks? Recently, many Hong Kong stocks related to crypto have performed well, like some companies riding the stablecoin concept.

Jason: We continuously track Hong Kong-related targets, but we remain cautious during phases of insufficient liquidity and information symmetry, and we do not comment on individual stocks until the compliance window is clear.

Colin: Understood. Returning to your earlier judgment, you believe there may be a 30% to 50% adjustment in the next year. Based on this judgment, will your investment strategy differ significantly from the last cycle? For example, holding more coins or bottom-fishing during declines?

Jason: I think so. The previous fund could not short, so we chose to reduce our positions comprehensively at the end of February and successfully avoided the drop in early April; however, due to settlement processes and the KYC rhythm of new investors, we missed about half of the rebound segment. Nevertheless, our ability to judge large cycles and major fluctuations has been validated many times, including seizing opportunities during the two pullbacks of over 20% last year. This is not because I am particularly smart, but more about strictly executing trading discipline. We have a valuation model: sell when overvalued, buy when undervalued, regardless of what the market says.

Institutional Wave: The Future Landscape of Crypto Assets

Colin: Finally, what do you think about the future of crypto assets?

Jason: I will share three data-driven observations.

First, the penetration rate is still very low. The global stock market is valued at $110 trillion, while crypto assets are less than $4 trillion, accounting for 3.4%. If it rises to 10%, that would be an $11 trillion market, a threefold increase. This is not a question of whether it will happen, but when.

Second, institutionalization has just begun. In the past year, there has been a net inflow of $100 billion into ETFs, which sounds like a lot, but global pension management exceeds $60 trillion. They haven't even allocated 1% yet. In the next five years, as regulations become clearer and infrastructure improves, these long-term funds will gradually enter the market.

Third, the cycle is changing. Previously, there was a four-year cycle dominated by retail investors, with extreme volatility. Now that institutions have entered, volatility is decreasing. Previously, Bitcoin's volatility was three times that of the Nasdaq; now it may only be 1.5 to 2 times. It is becoming more like a mature asset class.

So I remain long-term optimistic. In the short term, the market may experience adjustments, even causing some pain, but from a longer-term perspective, this trend is irreversible. NDV's mission is to provide investors with a safe and controllable participation path within a compliance framework. For us, risk control always takes precedence over return targets.

We do not chase quick riches but pursue steady compound growth; we do not enter the market with a gambling mentality but adhere to the discipline of long-term investment. The market will ultimately reward those who are patient, restrained, and adhere to their principles.

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