The following text is organized from the series Twitter Space #DialogueTrader, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X.

This episode's guest: Jason Huang, Twitter @Jhy 256

"Penetration rate" logic makes internet investors go all-in on Crypto.

Jason describes his background as quite Web2; as an internet VC, he worked at Huaxing Capital and Qiming Venture Partners, then went to the family office of Alibaba's chairman, Cai Chongxin, responsible for all domestic investments.

Jason's first purchase of coins was during the ICO boom in 2017, but at that time his understanding of Crypto was still at a 'somewhat like a scam' stage, so he made a little money and left the market.

Deeply understanding Crypto was influenced by the 'walkway' from the big V 'Lunch' in 2020: Bitcoin is a good long-term asset and should be held long-term. The logic that successfully brainwashed Jason is:

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, Crypto had a penetration rate of 100-200 million people, out of a global population of 6 billion, and reaching 2 billion should be a simple and replicable process. In fact, the current penetration rate of Crypto is still only around 600 million, leaving a lot of room for growth.

Fast forward to 2023, this year Jason left the family office and founded his own fund NDV, entering the market when Bitcoin was around 29,000. Today, about 20 months later, he has achieved a return of over 4.3 times, outperforming BTC.

The trading strategy Jason uses, looking back, is actually very simple.

Why choose $MSTR?

Since founding his own fund, Jason has adhered to the 'penetration rate' logic, 'The things I buy are called institutional penetration rates.'

So in 2023, they only did one thing: buy GBTC. Because at that time, GBTC was at a discount to Bitcoin, so they outperformed Bitcoin during that phase.

When the ETF passes and the discount recovers, Jason starts to think about what kind of more exciting configurations institutions would want after buying Bitcoin ETF.

The answer is: stocks related to Crypto.

So the options in front of him are mining stocks, Coinbase, and MSTR. After some trial and error, Jason and his team chose MSTR, with only one reason: the simpler the logic, the easier it is to build consensus, at least during the phase when everyone just started learning about Crypto.

Companies like Coinbase, which have fundamentals, are researched by many institutions for their fundamentals and PE ratios, making them harder to buy; mining stocks follow another logic. Although theoretically, small-cap stocks might rise faster, this has not been the case so far, because once there are more than one mining stock, it can easily disperse consensus.

From the perspective of results, it can also be seen that MSTR has outperformed Nvidia, outperformed Bitcoin, and outperformed many things.

What does the 'big money' in the market care about the most?

In Jason's definition, big money goes from sovereign wealth funds to insurance companies, university funds, endowment funds, and various hedge funds. The penetration rate of Crypto for these entities is likely less than one in a thousand.

What big money cares about is simply understandable and liquid.

So their positions at this stage can only be in Bitcoin or a few stocks, and stocks with better liquidity will attract more consensus because big money needs to consider entry and exit.

"So my logic is very simple: where there is simple and easily spread consensus, where there is good liquidity, is where big money may flow in.

In fact, XRP and SOL can attract more attention for this reason, especially XRP, which has existed for a long time, has a huge market value, excellent liquidity, and occasionally has lawsuits that catch everyone's eye.

Ultimately, finance is a game of supply and demand, so you need to see what big money is thinking. All those things that require a lot of effort to gather new consensus are not worth gambling on. As long as the large positions are in some correct assets, you can outperform others.

When will the bull market 'peak'?

In fact, Jason's Twitter has been verified many times, confirming the accuracy of his judgment on long-term trends. Regarding the thought of the bull market peak, Jason still follows the logic of 'What is the big money thinking?'. He believes that from the issuance of the ETF to now, BTC has risen from 40,000 to around 100,000, and the market has infused 30-50 billion USD. If it wants to reach 150,000, it will require at least an equivalent amount of money.

Where does the money come from?

Looking at sovereign wealth funds first, basically only the US has put out such a large amount of money; or rather, only the US can afford it. So Jason judges that in the short term neither the Federal Reserve nor the Treasury will put out this money.

The remaining 'big buyers' that can be seen now 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, 50 states could collectively contribute at least 50 billion to 100 billion.

"So if I do a simple math problem, my heart's position (top) is around 150,000."

Regarding macro on-chain data that can be referenced, Jason recommends following Twitter @Murphychen 888.
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Moreover, Jason believes that today's market is actually very 'transparent' because under the backdrop of the US dominating the market, all core event dates are announced in advance, so there won't be sudden regulatory announcements, which gives participants enough time to think about whether there is any running ahead of the market and whether there is any early speculation. Any event that is above or below expectations reflects a certain state.

"The macro judgment, combined with Bitcoin's supply-demand data, essentially makes it very clear what kind of story the market wants to tell."

Will the four-year cycle still exist?

Regarding the changes that may occur in the future market, Jason believes that cycles will still exist, but there will no longer be a four-year cycle, because the supply-side pressure that occurs every four years has weakened a lot. The 'four-year cycle' is more of a strong psychological imprint.

At the same time, long money will come in, and the market will trend towards the US stock market, with various coins gradually developing their independent narratives & trends, no longer moving in sync with BTC.

Because Jason judges that the most important thing the Trump administration will do next is actually redefine what a token is. Tokens will no longer be securities, or even allow tokens to have dividends and buybacks. When these tokens have their own distribution logic, they may be able to develop their independent narratives.

"Crypto will not be as much like A-shares' sector rotation, but will resemble the strong remain strong of US stocks. The essence is that market participants have changed."

How to choose small-cap coins? Don't look at fundamentals, only choose good Founders.

Regarding trading altcoins, Jason also has a simple selection principle: only choose tokens of Founders he knows under the big trend.

"In fact, most of the Founders in Crypto are people who just want to make a quick profit and leave. So as long as he does not intend to cut and run, and as long as he keeps working, your loss is really just the opportunity cost."

As for judging the Founder, Jason believes there is no systematic method to filter out all 'good people', so he focuses on one characteristic: 'Does it have high growth potential?'.

"He is either an incredibly unreliable salesperson or a hardworking type; I don't reject either, as long as he is growing and can deliver new insights every time, and he is practically doing it, I think he is a good Founder for me."

How to continue to grow? A book, a path, a person.

The way Jason keeps improving is: admitting mistakes and learning to face himself honestly. He recommends everyone to read (The Road Less Traveled), a book that changed his life, teaching him that when making mistakes, he should neither blame others nor over-punish himself.

"Admitting mistakes is the beginning of changing oneself; being able to bravely admit mistakes is really impressive."

Focusing on trading, Jason believes the way to keep improving is: practice, iteration, review.

One difficult method that he himself hasn't 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, the trader Jason recommends following is Lunch, who has shaped much of Jason's foundational understanding of Crypto, and Lunch knows well what to take and what to leave. At the same time, he 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: The way I keep improving is by putting money in.

Regarding how to continue improving and staying sensitive to new things, I also shared my thoughts and practices with Jason.

I believe that everyone has a different way of perceiving 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 staying in trend is to put money in.

The specific method is, first step, build a 'zero fund', follow smart people, smart groups, and smart money, add some basic judgments on top of what they buy, put money in, and if most tokens rise, it indicates that this track is worth my attention.

The second step is to put another 'tenfold fund' in, putting more money than the 'zero fund', and then make a tenfold bet on the leading projects that emerge from the 'zero fund'. After iterating for a while, he finds this method suits his style of keeping up with market rhythms.

Especially now with on-chain transactions, it's an 'accelerated version of the crypto circle', and you don't have time to study. For example, GOAT dropped from 200 million to 100 million USD, and within four or five days, it was pulled to 1 billion. If you didn't start tracking from a market cap of several million, it's likely you wouldn't find this thread.

So what I am doing now is putting money in, feeling it down below, and then being able to quickly decide and increase my position above.

Written in the end

In fact, the biggest feeling from chatting with Jason is that we are both highly sensitive individuals; perhaps most traders are in this state. The greatest joy of trading is the challenge with oneself. You don't need to know many people; just find some interesting ones to chat with, it's very free.

Thanks again to Jason for participating in the dialogue with traders; previous Space audio will be updated in Xiaoyuzhou, search for Dialogue Traders.