Editor | Wu Talks Blockchain

In this episode, we speak with Jason Huang, Founding Partner of NextGen Digital Venture (NDV), about NDV's origins, development, and investment strategy. NDV is an Asian compliance platform serving traditional financial institutions. Founded in 2023, NDV uses equities as a vehicle to help traditional financial institutions allocate crypto assets and provide crypto-related investment solutions. NDV's Phase I Fund (March 2023 to February 2025), operating under a compliant framework, achieved a cumulative return of approximately 275.5% and completed an orderly liquidation. During the same period, it achieved a positive excess return compared to Bitcoin (approximately 67.3 percentage points; past performance is not indicative of future performance). Relevant performance can be found on the Bloomberg paid terminal, ticker symbol: LSQNEXI. NDV's Phase II Fund is now open for subscription and will continue to focus on crypto-related assets, primarily equities, with a parallel allocation to equities.

During the interview, Jason shared the background of the NDV Fund since its inception in 2023, specifically his unique insights into the cryptoasset market, developed through his experience in traditional finance. He also explained how the fund entered the cryptoasset space through equities. The program also discussed the fund's investment results, how it leverages traditional financial instruments like stocks and options to cover crypto assets, and its approach to risk management and asset allocation amidst market fluctuations. Jason further disclosed strategic adjustments to the second phase of the fund, explaining how investment strategies will be optimized based on different market cycles, and providing forward-looking assessments of potential market corrections and structural opportunities.

From Grayscale Trust to Treasury Stock: NDV's Entry Point

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

Jason: The origins of NDV began with a conversation between Christian and me in early 2023. At the time, we observed a wide range of primary and secondary strategies, but relatively few institutional approaches to crypto assets through equities were available. This perfectly aligned with our capabilities and compliance requirements. I previously worked at Mr. Joseph Tsai's family office (Blue Pool Capital), responsible for China investments. I observed that crypto interest in Hong Kong had already experienced a surge in 2022, with family offices considering entering the market. Regulators were also developing regulatory frameworks, and we concluded that the window for traditional financial institutions to enter the crypto market had arrived.

At the time, the FTX incident had just occurred, and we believed that "bringing traditional capital into the crypto market in an orderly manner" was a significant, temporary opportunity. Furthermore, from a traditional financial perspective, I realized that allowing an institution or family office to directly open an exchange account (such as Coinbase or Binance) after the FTX incident would often encounter significant resistance and a lengthy internal compliance process. Institutional investors, after the impact of the incident, placed greater emphasis on audit availability, custodial security, and process integrity. In terms of entry barriers and compliance feasibility, stocks better met their needs.

In the initial stages, we heavily weighted our holdings in GBTC (Grayscale Bitcoin Trust, equivalent to holding Bitcoin in the form of shares). After the ETF was approved, we gradually shifted our holdings to high-beta stocks like MicroStrategy (MSTR) and Coinbase (COIN). Therefore, we were fortunate to have enjoyed two significant dividends. The ultimate result was quite encouraging. In approximately 23 months (March 2023 to February 2025), the first phase of the fund was liquidated and exited, with a cumulative return of approximately 3.75 times.

We're fortunate to have chosen a direction that perfectly aligns with current financial trends and the broader development of the cryptocurrency industry. The industry's funding structure is gradually shifting from being dominated by native crypto funds to being dominated by Wall Street institutional funds. For Wall Streeters, the easiest way to enter the cryptocurrency market is through stocks. Two or three months ago, we thought only a few stocks were worth watching. In recent months, treasury plays like Bitmine and Sharplink have been in high demand. To a certain extent, the risk appetite of the "altcoin rotation" is spilling over to treasury stocks in the US stock market. At this moment, I'm starting to wonder if there will be an altcoin season on exchanges in the future.

The second phase of the fund has been launched: AUM exceeds US$100 million

Colin: So has your second fund been established?

Jason: It has been established and our total AUM has exceeded US$100 million.

Colin: So have you already started investing, or are you still in the research stage?

Jason: Phase II began 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. We subsequently steadily built positions in the BTC range of $106,000–107,000, and currently have a paper profit of approximately 20% (depending on market fluctuations and not a commitment).

Colin: So is your current investment strategy different from before?

Jason: I think the only difference is that Phase I was a long-only structure, primarily focused on long positions. Phase II added modest shorting and hedging tools to the terms and conditions, with the goal of controlling the volatility of net exposure. At the same time, I also left a small loophole in the fund's terms and conditions, primarily because I still have some expectations. If the US regulatory path for institutional token holdings becomes clearer, token investment could become a non-linear investment opportunity, and we want to reserve a small proportion of the mechanism to seize potential opportunities. I generally try to keep my money in less crowded areas. We are also conducting counter-cyclical research on some primary projects, making appropriate allocations when valuations and liquidity align. We focus on crypto-related stocks, not just the Bitcoin chain. Recently, the market focus has been more on the Ethereum ecosystem.

Colin: Will you also invest in some Ethereum coin-stock projects?

Jason: Yes, at reasonable valuations. We start with quantifiable pricing and enter only when discounts, liquidity, and a safety margin are met. We also have a pre-set exit strategy. We tend to tilt our positions toward assets that are significantly below the market average or where they should be. After all, our first pot of gold came from GBTC, which is a discount to BTC. Therefore, we are attracted to any discounted asset in a mature market. We evaluated discounted SOL claims/shares in the FTX asset package, but ultimately did not exercise them.

Colin: Didn't you buy in then? Actually, many institutions in Hong Kong were buying in that direction, and some of our friends were also involved.

Jason: I didn't buy in the end, but it was actually a matter of time and energy. After all, running two funds simultaneously in the early stages of a startup doesn't allow for focused focus. Here, I'd like to explain my investment philosophy. I tend to consider issues across asset classes. Having previously worked in a family office, I've carefully considered primary, secondary, and LP investments. So, sometimes when primary assets are cheap, we're significantly more willing to invest in them. Other times, when the secondary market is significantly more discounted than the public market, we're willing to buy into the secondary market. The underlying principle remains "valuation-driven, disciplined trading," essentially buying at low valuations and exiting after valuations have recovered. Regardless of the industry, investors ultimately come down to whether they have the patience and dedication to persevere until asset prices are cheap while maintaining sufficient capital. This is where we focus our daily adjustments and refinements.

From Phase I to Phase II: Strategic Upgrades and Differences

Colin: The timeframes for your first and second funds may differ slightly, as your first fund was launched during a period of transition from a bear market to a bull market. Are you worried that the current market might be peaking, or even unsure whether your predictions will shift to a bear market at some point?

Jason: Yes, there's a saying, "Never short your country," so if you're bullish on a sector, try not to short it. We're no longer mechanically applying the "four-year cycle"; we're more focused on the new rhythm of "US stock correlation driven by institutional capital." Bitcoin's pullbacks and volatility will change with the current wave of Wall Street investors entering the market. Wall Street investors don't use leverage, and given Bitcoin's higher market capitalization and stronger consensus, it will be more stable and allow for more robust trading. Today, I'm looking at this sector more based on Wall Street pricing, and its correlation with US stocks will be very high.

In the past, BTC's volatility amplification factor relative to the Nasdaq was approximately 3x; currently, we prefer a range of 1.5-2x. Historically, a 20% to 30% drop in the Nasdaq is normal in any US stock market cycle. Therefore, my current expectation is that Bitcoin could fall by 30-50% in a down cycle, but this assumes it hasn't peaked yet. Earlier this year, in January, we wrote an article suggesting Bitcoin would reach $120,000 to $150,000 before Q2. It ultimately broke through $120,000 about three weeks late. While late, it's close. I believe there's no peak in a bull market, as peaks are undoubtedly bought by the most irrational investors. However, considering the overall valuation of US stocks, we adhere to the principle of "no peak in a bull market." While we are systematically reducing our offensive position and increasing our defensive weighting based on valuations and correlations, we are gradually reducing our offensive weighting and increasing our defensive weighting.

Colin: On the other hand, you just said that you are also looking for some primary opportunities. You may be more interested in those that are related to listing, that is, they may have the prospect of listing in the future.

Jason: Yes, regarding primary projects, I firmly apply the most rigorous private equity methodology to evaluate primary opportunities: 1) business quality with long-term holding potential; 2) clear listing/exit paths; and 3) reasonable liquidity discounts. However, such targets are rare. Globally, the number of projects that meet all three of these criteria is currently very small, estimated to be in the single digits.

Colin: I understand. It will probably take a long time for you to close this phase. Do you have a plan?

Jason: We are a licensed hedge fund in Singapore, and we open subscriptions and redemptions monthly (refer to the fund documents for details). Investors are subject to minimum subscription thresholds and lock-up periods. We currently have three groups of investors. The first is entrepreneurs from the Peking University alumni circle. Since Christian and I both graduated from Peking University, the alumni connection fosters trust. The second group is the family offices of successful Web2 entrepreneurs, primarily those in internet, pharmaceutical, gaming, and technology companies, who want to allocate some capital to crypto. We're also slowly starting to attract some US investors, including some large US hedge fund families. They understand what we do better and recognize our expertise in this field. Honestly, our limited partners are relatively traditional. They don't go all-in on crypto; they consider it as part of their asset allocation. This is actually a good thing; they don't get overly nervous about short-term fluctuations.

Ethereum Treasury Craze: Bubble or New Trend?

Colin: What do you think of the currently popular Ethereum-related companies like MicroStrategy?

Jason: Essentially, it's a trading vehicle for the "treasury narrative," and the current market is willing to pay a premium for this narrative. They're also helping crypto reach users more efficiently. But why are these premiums so high? I believe each company has its own reasons. Take MSTR, for example. They primarily use convertible bonds to indirectly gain BTC exposure by introducing traditional bond funds, with the premium borne indirectly by the convertible bond buyers. Some ETH-related treasury companies, on the other hand, prefer ATM (at-the-market) issuances to capitalize on retail investors' interest in ETH. Therefore, the premiums and market potential of these two companies are actually quite different. Such high premiums are difficult to sustain in the long term, depending on refinancing efficiency and balance sheet sustainability.

Colin: So from your perspective, you don’t think these Ethereum microstrategies are going to be as long-lasting as the MicroStrategy ones?

Jason: It's hard to say right now. I'm a more conservative person and prefer to take a longer-term view. MicroStrategy couldn't even foresee its future two or three years ago; it's building things step by step. But it's impossible to predict the current mindset of all the treasury companies involved in Ethereum today, especially those early investors. After all, from the time the treasury was founded until today, the market value of their holdings has skyrocketed several times. It's hard to predict whether this will trigger a stampede by original shareholders when the lock-up period ends or the market turns. But one thing is certain: all of this is beneficial to the Ethereum market, as these treasury companies won't sell for the foreseeable future. Therefore, there's still some certainty about which option to choose in this game. I prefer to avoid gambling.

Colin: So you'd rather wait? Can you predict what the top price of Bitcoin and Ethereum will be in this cycle?

Jason: Haha, it's not entirely about waiting. It's more about disciplined execution and finding the investment opportunities that suit you best. Honestly, I personally don't like to predict prices. As a secondary fund, I'm more focused on responding to market fluctuations. As I said earlier, there's no peak in a bull market.

As for the price, I believe there are many influencing factors. Bitcoin's rise from $40,000 to $100,000 cost approximately $100 billion. This $100 billion primarily consisted of buying from ETFs and micro-strategies. The subsequent incremental buying demand from $100,000 to $150,000 is likely to be significantly higher than the previous phase. Without a similar level of incremental capital (such as from large institutional/long-term funds), upward momentum will take time to build.

Christian: Pension funds. A lot of people have mentioned this recently, but I haven't looked into it in detail. What do you think of pension funds?

Colin: I've seen some opinions that pension funds' investment process will take time because they can't immediately invest in such high-risk assets.

Jason: I'm more focused on "verifiable actual net inflows" rather than mere expectations. Trading revolves around supply and demand, and shifts in capital preferences. I believe all current changes in the capital markets, not just in the cryptocurrency sector, are driven primarily by supply and demand. For example, when Alibaba's stock price was trading at 40x or 50x P/E, no one considered it expensive. Now it's down to 8x P/E, or 5x after deducting cash, and no one considers it cheap. This is all due to shifting capital preferences. Therefore, I believe capital appetite for crypto is already very high. According to some institutional research, current "crowded trades" include AI, shorting the US dollar, gold, and crypto, indicating that risk appetite remains high, but marginal crowding is also increasing.

Colin: Yes, I think your estimate is quite conservative. You think it is difficult for Bitcoin to exceed $150,000, right?

Jason: I am thinking about the next year's time period based on the current actual situation. If the market provides more new information, I will also adjust my views.

Colin: What do you think about Ethereum?

Jason: I believe a 30%–50% retracement in BTC over the next year would be the best buying opportunity (not a prediction, but an internal risk assumption). As for Ethereum, ETH's volatility is more resilient and its range is more difficult to pin down, but the conditions for a breakout from its previous high are in place within the next year [ETH's price broke through its previous high shortly after this interview].

Colin: Things like Tom Lee and companies like MicroStrategy, which are involved in Ethereum, were completely unexpected. A few months ago, everyone was still criticizing the Ethereum Foundation, saying it was selling a few today, a few thousand tomorrow. Then, when these companies arrived, they simply bought up all of the Ethereum Foundation's Ethereum without a problem. This was truly unexpected.

Jason: The current size of the pledge exit queue is quite large (about one billion US dollars), and we need to pay attention to the short-term elasticity of the supply side.

Colin: But the market is constantly iterating.

Jason: Yes, it's difficult to predict. I think the peak will eventually be traded. Ultimately, it all comes down to supply and demand. It needs to be considered in conjunction with technical analysis, capital flows, and on-chain data.

NDV: Proceed cautiously in the new cycle

Colin: Will you look at some mainstream altcoins other than Bitcoin and Ethereum, or the strategies of their related companies?

Jason: Very little. Our principle is to only invest in assets with good liquidity, transparent information, and that we can understand. Of the thousands of coins on the market, we stay away from 99% of them. It's not that they're bad, it's that we don't understand them. One thing I learned while working at Blue Pool: Don't make all the money, only make money within your circle of competence. Investing isn't purely a competition of knowledge. The crypto market is full of opportunities and temptations. We stick to the few assets we understand and keep investing in them. Boring but profitable.

Colin: Do you follow the Hong Kong stock market? Recently, many Hong Kong-listed crypto-related companies have seen strong gains, such as some companies that are capitalizing on the stablecoin concept.

Jason: We continue to track Hong Kong-related stocks, but remain cautious in the stage of insufficient liquidity and information symmetry, and will not comment on individual stocks until the compliance window is clear.

Colin: I understand. Going back to your prediction, you believe there could be a 30% to 50% correction over the next year. Based on this prediction, will your investment strategy change significantly from the previous cycle? For example, will you hold onto your coins more, or try to buy dips during market dips?

Jason: I think it's like this. Because short selling wasn't allowed in the previous fund, we reduced our holdings across the board at the end of February and successfully avoided the early April decline. Subsequently, due to settlement procedures and the KYC process for new investors, we missed about half of the rebound. However, our ability to identify large cycles and major market swings has been proven numerous times, including last year when we experienced two corrections exceeding 20%, which we seized. This isn't about me being clever, but rather about strict trading discipline. We have a valuation model that sells when overvalued and buys when undervalued, regardless of market sentiment.

The wave of institutionalization: the future of crypto assets

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

Jason: Let me share three data-driven observations.

First, penetration is still very low. The global stock market is worth $110 trillion, while crypto assets account for less than $4 trillion, or 3.4%. If this rises to 10%, the market will reach $11 trillion, tripling its potential. This isn't a question of if, but when.

Second, institutionalization is just beginning. ETFs saw net inflows of $100 billion last year, which sounds like a lot, but global pension funds manage over $60 trillion. They currently don't allocate even 1% of their funds. Over 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, the market cycle was four years, dominated by retail investors, with sharp rises and falls. Now, with the entry of institutions, volatility is decreasing. Previously, Bitcoin's volatility was three times that of the Nasdaq, but now it's probably only 1.5–2 times. It's becoming more of a mature asset class.

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

We don't chase quick riches, but rather steady compound growth. We don't enter the market with a gambling mentality, but rather adhere to the discipline of long-term investment. The market will ultimately reward those who are patient, restrained, and stick to their principles.