Interview: The Round Trip

Compiled & Organized by: Yuliya, PANews

In the complex backdrop of Bitcoin spot ETF approval and accelerated institutional capital inflow, while the global macro interest rate environment remains high, the traditional investment paradigm in the crypto market is facing profound challenges. As the old map of the "four-year cycle" may no longer apply, investors urgently need a brand new navigation chart to traverse the fog and seek certainty through bull and bear markets. Jason Huang, founding partner of NextGen Digital Ventures (NDV), brings a unique value investment perspective to the market, refined from his experience in the traditional financial world.

With over a decade of venture capital experience at top institutions such as Huaxing Capital, Qiming Venture Partners, and BlueRun Ventures, his crypto equity fund NDV achieved an outstanding performance, outperforming Bitcoin by 60%-70% in its first phase. In the new series "Founder’s Talk" produced by PANews and Web3.com Ventures, host John Scianna and Cassidy Huang invited Jason Huang to share why he resolutely entered the crypto industry at the end of the bull market and to elaborate on his unique insights into the current market cycle. He emphasized how to apply classic value investment principles to crypto asset valuation, such as pursuing excess returns through strategies like investing in Upbit (an exchange that is still undervalued compared to Coinbase).

Bear Markets Are the Best Investment Opportunities; Asian Allocation Remains Conservative

Host: Welcome, Jason, to this episode. The timing of your entry into the crypto industry is quite interesting, as it coincided with the end of the last bull market, followed by a complete experience of a bear market, and now the market seems to have entered a period of adjustment. Looking back, do you regret your decision?

Jason: Of course, I do not regret it. First of all, I have always believed that bear markets are the best investment opportunities. We were very fortunate that NDV's first fund officially launched in March 2023, when Bitcoin was around $30,000. Then, we completed the exit liquidation of our first fund before the market rebounded significantly in February this year. You could say that our first fund performed very well, bringing nearly 4 times the return to our initial investors, with the investment targets mainly in crypto equity.

I feel that the current stage is very different from when I first entered the market. Back then, I had to spend a lot of time convincing clients that crypto assets were worth allocating, even if it was just 1%. But now, especially after the approval of the Bitcoin spot ETF, institutional investors' interest has significantly increased. The focus of our discussions with clients has shifted from "should we invest" to "what percentage should we allocate" to crypto assets.

Host: What have you observed about their current allocation percentages? Has there been any change in this percentage over the past few months?

Jason: I live in Asia, and in Asia, the allocation to crypto assets is generally low, still in a very early stage. Most of the people I interact with have less than 1% of their total assets allocated to crypto. Now, I usually suggest they increase this percentage to around 5%. I believe this is a more conservative and balanced allocation plan for them.

Current Potential Selling Pressure Is Limited; A Rally May Come Next Year

Host: Since the beginning of this year, we have seen Bitcoin drop over 30% from its peak. We are curious about how traditional Web2 investors currently view crypto assets and the entire blockchain industry. Are they still full of interest, or do they see it as a high-risk asset that needs to be reduced?

Jason: I think it varies from person to person. For those who entered the market this year, most have likely experienced some asset drawdown and will choose to hold on, but if you ask them to increase their positions now, considering the market volatility over the past three months, they may act more conservatively.

However, for those who have never allocated before, I believe they are now eager to enter the market. Many are worried about the so-called "four-year cycle," as it has indeed recurred in the past. But my personal view is that we may not experience the traditional four-year cycle again. The reason for past cycles was that Bitcoin's new supply (block reward halving) occurred every four years. But in the current cycle, about 19 million Bitcoins have already been mined, and the new issuance over the next four years will be only about 620,000. This potential selling pressure is actually negligible compared to the scale of ETF capital inflows we have seen in recent years.

So I believe that Bitcoin has become more or less correlated with the U.S. stock market. Considering we are still in a high-interest-rate environment, once the Federal Reserve starts to cut rates next year, I believe a new bull market will begin. Therefore, I am quite bullish right now.

Host: Your bullish logic is interesting. But if we look beyond the crypto circle, since crypto assets are highly correlated with U.S. stocks, why should I take on such high risk to invest in them? It seems much less risky to invest directly in the AI industry.

Jason: If you look at the performance of different asset classes from a more macro perspective, you will find that Bitcoin may be the only major asset class that has shown negative returns this year. I joked before that this year we even underperformed some emerging market assets in Asia. This is very unusual for Bitcoin, as looking back over the past 12 years, it has been the best-performing asset class for nearly 9 years.

So I believe that we are actually in the "later stage of the bear market," and compared to other assets, Bitcoin's performance has been significantly undervalued. Therefore, next year is likely to see a rally. As for AI, to be honest, I don't have a particularly firm view. I was watching an interview with Michael Burry this morning, and he talked about Palantir; I casually checked its price-to-earnings ratio (PE), which is as high as 800 times… I find it hard to understand how that can be considered undervalued.

Family Offices in the Tech Sector Are the Main Force Entering Asia; Bitcoin and Gold Are Beneficiaries of the Macro Environment

Host: But the price-to-earnings ratio of Nvidia is not that exaggerated. Speaking of investor types, I feel that Asian investors are generally more traditional; they are not even risk-averse like Web1 investors and prefer to invest in tangible assets like real estate. It seems quite a challenge to get them to cross over into AI or crypto. Or do you think they prefer a Buffett-style investment approach, favoring businesses that can generate stable profits?

Jason: I think there is nothing wrong with that investment philosophy, and I wouldn't simply categorize all Asian investors into one group. The traditional real estate families you mentioned indeed prefer tangible assets that generate stable cash flow, but they are also facing significant pressure recently.

What I encounter more are family offices from the Chinese tech industry. In their world, success comes from "network effects." Globally, apart from Bitcoin, there are hardly any assets that possess the same level of network effect. Bitcoin is likely to become the most popular "application" in the next 10 to 20 years because it is an asset that almost everyone would be willing to hold a certain proportion of. So, if we look at the buyer structure, the main force entering the Asian market right now is these family offices from the tech sector.

Host: So for these family offices from the tech industry, do you think their demand for Bitcoin allocation is continuously growing? Especially at this point in time, is there a strong demand for further increases?

Jason: If we only discuss Bitcoin itself, I believe everyone has already realized that the U.S. government will continue to "print money," so both gold and Bitcoin are undoubtedly direct beneficiaries in this macro environment. This is beyond doubt. Among the people around me, at least 80% already understand the significance of Bitcoin as a "store of value."

As for the understanding and acceptance of other crypto assets, I think it remains a "half-question mark." But personally, I believe that crypto exchanges and stablecoins are the true "business models" in this industry. For those investing in tech stocks, understanding these types of models is not difficult.

ETFs Restructure Buying Logic; DAT Is More Like Regulatory Arbitrage

Host: You just mentioned that the traditional four-year cycle may have become ineffective. But based on past experience, bear markets usually last three years, with a 70%-80% drawdown from the peak. In the last cycle, Bitcoin didn't even double from its high of $60,000. How do you explain this structural change?

Jason: Yes, I believe one of the most important structural changes in this cycle is the emergence of Bitcoin spot ETFs. This allows institutional investors to enter the market on a large scale and in a compliant manner for the first time. This directly leads to several key impacts:

• Bitcoin has become more stable: because more long-term, rational institutional investors are participating.
• Funds have not flowed into altcoins: ETFs are a "one-way street" flowing into Bitcoin; institutional investors do not like assets that lack cash flow and intrinsic value support. So we hardly see a so-called "altcoin season."
• Mining costs have become a strong support: Currently, the mining cost of Bitcoin is around $70,000 to $80,000. I'm not saying the price can't drop below this cost, but it is a very strong psychological support point, and many institutional buyers will reference this price as their entry range.

These factors together have led to Bitcoin's price becoming more stable, making it difficult to see the kind of 75% drawdowns we used to experience.

Host: Since the market structure has changed and volatility has decreased, can Bitcoin still achieve 2x, 3x, or even 5x growth like in the past after the bear market ends?

Jason: I believe that in the past, Bitcoin could rise 5 to 10 times, partly due to the high leverage, especially from retail investors. When a large number of shorts are liquidated, it becomes the "fuel" that drives prices up. But now, since ETFs have taken over most of the trading volume, it will become more difficult to see the kind of explosive growth we used to experience.

So many people are discussing whether they can still outperform Bitcoin in the future. The performance of our first fund actually answers this question; we outperformed Bitcoin by about 60%-70%. I believe the reason is that we are betting on those crypto-related stocks that have real value and can be valued using price-to-earnings ratios. When the market enters an expansion cycle, you will enjoy the dual benefits of price-to-earnings multiple expansion and corporate net profit growth, and this return structure has the potential to outperform Bitcoin. So I think that investing in crypto-related stocks now may be more attractive than in the past.

Host: You are very optimistic about investing in crypto stocks. But is there a systemic risk here? For example, Strategy has already hinted that if stock prices fall below net asset value (NAV), they may have to sell Bitcoin to repurchase stocks. If this happens, could it trigger a crisis of confidence in the market?

Jason: This is indeed a potential risk within the ecosystem, but I don't think it's a major issue. First of all, I would separate Strategy from other Digital Asset Trusts (DATs). According to their recent disclosures, they have prepared cash to cover about 24 months of debt interest, which significantly alleviates short-term selling pressure.

As for other DATs, I don't like them when they are at a premium. Because you can get the same exposure by directly investing in ETFs. The only difference between DATs and ETFs is that they can be staked for additional returns, which to me feels more like a "regulatory arbitrage." Currently, most DATs are trading at a 20%-30% discount, which may provide some arbitrage opportunities, but that's about it.

Overall, I am not particularly fond of Ethereum as an investment theme. If you consider gas fees as the "net profit" of the Ethereum network, its current valuation exceeds a 100 times price-to-earnings ratio, similar to Palantir in the AI field. Therefore, I prefer crypto stocks like Coinbase over Ethereum itself.

Value Investing First, Optimistic About RWA and Prediction Markets

Host: So, what is the core investment logic of your new fund (Fund II)?

Jason: Our strategy is to go long on those targets we believe are undervalued. While I can't disclose specific public targets, for example, we recently significantly increased our position in Upbit, the largest crypto exchange in South Korea. This company is valued at about $10 billion but generated over $700 million in net profit in 2024 and distributed $200 million in dividends. Its price-to-earnings ratio is only around 15 times, while exchanges with real profits globally typically have P/E ratios between 30 and 70 times. It is fully compliant and audited by PwC Korea.

Our fund initially started by buying GBTC at a discount. For me, investing in Upbit is like "GBTC 2.0," buying a high-quality business modeled after Coinbase at a discounted price. This is a typical case we prefer: value investing first, then discussing future potential.

Host: It sounds like you are a very disciplined investor, which may stem from your experience in traditional finance. In contrast, crypto investors seem to love leverage.

Jason: Yes, but I believe there are three things that will absolutely "kill" you in the crypto world: leverage, asset custody risk, and altcoins. If I were to add one more, it would be "alcohol," especially during industry conferences. As Charlie Munger said, "Stay away from things that will kill you." If you can successfully avoid these points, you can become one of the top 10% of investors in the crypto market.

Host: One last question, looking towards 2026 and beyond, besides being optimistic about Bitcoin, what other outlooks do you have? Do you think funds will flow back into altcoins?

Jason: I am personally very interested in a particular track, which is the penetration of stablecoins. I see stablecoins as an "upgraded version of banks." When all payment channels and banking systems are upgraded as a result, the transaction costs of the entire financial network will be significantly reduced.

I am particularly focused on prediction markets like Polymarket, as well as all the new trading platforms that may emerge with the rise of stablecoins. I believe there will be a lot of innovation here, possibly in RWA or other new forms of business. Perhaps we will see the birth of the "next-generation Stripe" in the crypto world, as more and more people with crypto assets wish to use stablecoins for everyday payments. These innovations will create real practical value, which is completely different from the pure meme narratives we have seen in the past few years. I am very optimistic about this field, but we need to be patient and wait for these companies to mature or go public.

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