Guest: Jeff Park, Bitwise Asset Management Trader
Hosts: Bonnie & David Lin
Podcast source: Bonnie Blockchain
Original title: How to invest to turn things around? The only investment rule I learned at Morgan Stanley! Jeff Park [Bonnie Blockchain]
Air Date: July 24, 2025
Summary of key points
Traditional investment allocation is dead! Jeff Park, head of Bitwise Asset Management, publicly stated for the first time in the Chinese-language world: The 60% stock/40% bond portfolio is a dated playbook!
The stock market has long since devolved into a casino, bonds have lost their safe-haven value, and young people are no longer willing to participate in the corrupted games of the old financial system. As an investment expert who once cut his teeth at Morgan Stanley, he relied on a single, ironclad principle to break free from the constraints of the system and rebuild investment logic. Jeff Park developed the theory of radical investing, designing a new set of rules for survival in this new era of uncertainty.
Summary of highlights
“Resistance assets” can hedge 100% of compliant assets (such assets rely on brokerage firms and leverage operations). “Resistance assets” are difficult to obtain. They are not something you can easily buy on the stock market. They are non-fungible and cannot be leveraged.
Scarcity itself is value. In a world full of financial repression, we need to find assets that are not artificially created, which is why Bitcoin is particularly important today.
If you truly want to diversify away from the traditional financial system, then assets that are independent of the system and fully under your control are truly valuable. This “system-free” nature is the most important source of value for these assets.
The key to value is that it must be a scarce physical asset that cannot be easily manufactured; these assets also need to be non-fungible, meaning they cannot be easily copied or standardized; and another key factor is that these assets must have a certain degree of censorship resistance, meaning they do not rely on the traditional financial system.
If you truly want to diversify away from the traditional financial system, then assets that are independent of the system and fully under your control are truly valuable. This “system-free” nature is the most important source of value for these assets.
People often confuse value with price, but the difference is that price reflects what someone is willing to pay for something, while value is the inherent worth of something, which you usually don’t know until you experience it.
Young people have realized that the traditional financial system is somewhat manipulated, and they generally have low trust in the stock market.
Investing in Bitcoin isn’t always a bet on its price rising; sometimes it’s a bet on the value of fiat currency falling.
Our culture tends to simplify things, categorizing them as either "right" or "wrong," "left" or "right," leaving little room for nuance. But the world is full of nuance, and options trading can train you to focus on the distribution of possible outcomes, allowing you to see a more comprehensive picture.
The Altcoin market is clearly less active than it used to be. If you're looking for a high-risk experience, instead of buying some meme, you might try Bitcoin options, which can achieve a similar effect.
If you are bullish on Bitcoin, investing in Bitcoin through options is a very worthwhile approach, especially for those with a long-term investment perspective.
I learned a lot at Morgan Stanley. The first rule is “don’t make mistakes” and the second rule is “always remember the first rule.” These lessons are also applicable to the cryptocurrency field.
There are two main development directions for RWA. The first is to tokenize existing financial assets. The second is to tokenize assets that have never been traded or securitized.
The traditional 60/40 portfolio no longer applies & radical investment thesis
David: Today we're joined by Jeff Park, Head of Alpha Strategies at Bitwise Asset Management and a senior portfolio manager. Jeff, welcome! It's great to meet you, and we're looking forward to hearing your thoughts on Bitcoin and the cryptocurrency market.
Bonnie: Jeff is very popular on Twitter, especially his posts about "aggressive portfolios" which sparked widespread discussion. Jeff, can you explain what an aggressive portfolio is?
Jeff: That's a great question. I grew up studying traditional economics and finance, and that's been my life for almost my entire life. When I first entered the workforce, the global financial crisis hit, and I found that the theories I'd learned didn't seem to explain reality. The crisis led to a long period of "financial repression"—government interventions to keep interest rates low and restrict capital flows—that you wouldn't find in textbooks.
The term "aggressive portfolio" is a reflection of my personal experience, redefining how a new generation of investors should allocate assets. The traditional 60/40 portfolio—60% bonds and 40% stocks—is considered a classic strategy for balancing risk and return. However, in reality, we've discovered that the correlation between bonds and stocks is higher than imagined, and this combination fails to truly achieve diversified risk management . At its core, the aggressive portfolio approach fundamentally rethinks what constitutes a diversified asset allocation and how to redefine the sources and distribution of risk.
Bonnie: So in your theory, what is the new asset allocation method?
Jeff： Yes, we have to start with the question of why the traditional 60/40 portfolio is ineffective. When you dig deeper into this question, you will find that since the global financial crisis, most of the price fluctuations of securities and assets have been caused by government intervention and cross-border capital flows.
The global monetary system is currently experiencing massive fiscal spending, which has distorted the concept of GDP. For example, GDP includes government spending, but does this truly count as economic growth? This distortion has gradually transformed bonds from a safe-haven asset into a risky asset.
Once people realize this, they realize that the so-called 60/40 portfolio is actually 100% of a certain asset class. So what exactly is this 100%? I think it's 100% of "compliant assets." These are the assets we trade in our highly financialized world, relying on brokerage firms and leverage.
This global arbitrage system is the foundation of traditional finance. So, how do we hedge against these 100% compliant assets? The answer lies in what I call "resistance assets." These assets are difficult to access; they aren't something you can easily buy on the stock market. They're non-fungible and can't be leveraged .
Take gold, for example, but in this case, physical gold, not the GLD ETF. Physical gold represents a decentralized way to untether oneself from the traditional financial system. Bitcoin is also a resistance asset, providing another way to express views on this asset class. Then there are high-end art, one-of-a-kind works of art that cannot be replicated and have true scarcity and value.
Traditional bonds and stocks are less valuable because they can be printed endlessly. In contrast, scarce collectibles like Pokémon cards, while a bit of a joke, actually retain value for some. Furthermore, luxury handbags like Birkin bags, which are valuable due to their scarcity, hold their value even better than some traditional assets.
David: Sounds like an alternative portfolio.
Jeff: That's understandable, but these alternative asset classes don't fit into our traditional investment language. Few people consider buying Pokémon cards, handbags, or art as a way to diversify their portfolios because they can't be easily traded like ETFs. You can't easily buy scarce resources like biotechnology or legal intellectual property.
The value of these things comes from scarcity, and scarcity itself is the source of value. What I want to emphasize is that in a world full of financial repression, our generation needs to open their eyes and seek out assets that are not artificially created. This is why Bitcoin is particularly important today.
If I remember correctly, there was a very rare Japanese Pokémon card that was specially released for Peter's birthday. This card is so rare, especially in good condition, that its value could reach nearly a million dollars.
Alternative assets are not in the system
David: It sounds ironic, but there's a methodology for finding value. For example, the same method you use to value Pokémon cards could also be used to value an altcoin or a piece of art, right? Can you share your thought process with us?
Jeff: The key is that it has to be a scarce physical asset that can't be easily manufactured. If the asset can also decrease in quantity over time, that's even better, as it further increases its scarcity. For example, the value of Pikachu Pokémon cards isn't based on the sheer number of them, but rather on the fact that many of them are damaged or lost during use, making the remaining intact cards more valuable.
A similar example is fine wine. People buy wine not only for the sake of collection, but also because it degrades over time. If you preserve it properly, the value of the wine can increase exponentially. This demonstrates that scarcity is a core factor in determining value.
Furthermore, I believe these assets also need to be non-fungible, meaning they cannot be easily replicated or standardized . In contrast, the value of stocks and bonds depends heavily on the credit system, and their volatility is often artificially controlled. We should be looking for assets with inherent high volatility and performance potential, rather than volatility artificially created by the financial system.
David: Do you use any kind of model to decide how to allocate funds?
Jeff: This is more of a personal investment preference. I enjoy collecting unique artworks. For example, I'm particularly fond of the work of Daniel Arsham. His art blends street culture with high art, making it highly sought after. His work is frequently featured in renowned galleries. Artwork like this not only enriches a portfolio's diversity but also creates long-term value growth.
Another key factor is that these assets must be censorship-resistant, meaning they don't rely on the traditional financial system . In the stock and bond markets, your assets are typically traded through a brokerage firm, and you don't own them directly. Even if you hold Microsoft shares, they're registered in the name of a custodian, not directly owned by you.
Even if you own Microsoft stock, it's typically not held in your name, but rather in the name of a custodian acting on your behalf. Therefore, true ownership is crucial . This is why the distinction between gold and the GLD ETF is crucial. If you truly want to diversify away from the traditional financial system, assets that are independent of the system and under your complete control are truly valuable. This "system-free" nature is the most important source of value for these assets.
Many people confuse value with price.
Bonnie: I want to ask you, what is value? How is value created? Yesterday, Peter Schiff was sitting here and he said, "You Bitcoin enthusiasts are just trading 'nothingness'. You're buying nothing at all." If that were you, how would you respond?
Jeff: I would respond with a famous proverb that I think makes a lot of sense: People these days seem to know the price of everything but the value of nothing.
We live in an information-rich age, where we can see every transaction in real time, as well as the opportunities presented by high-frequency trading. While this trading data may appear to reflect some kind of value, it is, in reality, merely a snapshot of trading activity at a specific moment in time and does not represent true value.
In reality, truly valuable assets are often not traded frequently. The value of some things lies in their suitability for long-term holding, rather than for quick buying and selling. For example, many billionaires today invest in sports clubs and franchises. These assets don't trade frequently on the market. Instead, they're typically large, one-time transactions that can even be passed down from generation to generation, truly creating and transferring value.
So I think people often confuse value with price, but the difference is that price reflects what someone is willing to pay for something, while value is the inherent worth of something, which you usually don't know until you experience it.
Young people don't want to play the old system's financial games
Bonnie: Does this require a consensus, for example, most people agree that this thing is worth $2,000?
Jeff: It's possible everyone is wrong. Its value is largely determined by personal preference. It's similar to why older people prefer gold, while younger people prefer Bitcoin. Ultimately, these choices are a matter of personal preference. But another reason I'm bullish on Bitcoin and other stress-resistant assets is that I believe younger people have realized that the traditional financial system is somewhat rigged, and they generally don't have much trust in the stock market .
To be honest, I think our financial system is not doing a good enough job of building a fair and healthy market. For example, the volume of options with zero expiration dates now exceeds 50% of the volume of S&P 500 and Nasdaq options.
So-called zero-day options are essentially lottery-like financial instruments. Even more worrying is that this highly financialized phenomenon is occurring with the tacit approval of regulators, making the entire market look increasingly like a casino.
When young people see this, their reaction is completely understandable. They say, " I don't want to play this game because I don't understand how it works. But I'll buy what I like and what I recognize because at least it has value to me, and other young people will recognize its value. "
I think that's how value is created—because we start to really appreciate these things.
The value of gold
David: Let's talk about your overall perspective on these assets. You mentioned gold earlier, so let's compare it to Bitcoin. I read an article yesterday where a Goldman Sachs analyst predicted gold prices would reach $4,000. He believes gold is a better hedge than Bitcoin and predicts it will reach $4,000 in the medium term.
Gold has a very limited supply, with the vast majority already mined. Bitcoin's supply is also limited by design. I believe this limited supply provides greater comfort to investors worried about runaway inflation.
The article also mentions the geopolitical factors behind gold. Since 2020, many investors have flocked to gold, partly due to the weaponization of the US dollar and a decline in confidence in US Treasury bonds. Previously, people typically chose Treasury bonds and the US dollar as safe havens, but now, shaken confidence has led them to turn to gold. This is one perspective.
What do you think of what I just said, and the Goldman Sachs analysts' forecast?
Jeff: I think the value of gold comes primarily from its long-standing recognition throughout human history. This brings us back to the question of the source of value you mentioned— who determines what is valuable? Gold is undoubtedly one of the assets with the longest track record.
For example, I received gold as a gift at my wedding; later, when I had children, my family also gave gold. These traditions stem from the fact that gold is considered a "hard asset." It offers the opportunity to move beyond fiat currencies when necessary. Especially in extreme circumstances, gold's transferability makes it an excellent asset protection tool.
From this perspective, gold's psychological value does exist. Geopolitical factors cannot be ignored, either. While it wasn't particularly long after the collapse of the Bretton Woods system in 1971, for a certain generation, the memory of gold as a foundation of capital remains vivid. Many still yearn for an economic system based on real assets, rather than one that relied entirely on state credit.
If the world truly re-evaluates price systems like the gold standard in the future, gold may once again play a key role. Indeed, many governments and central banks are increasing their gold holdings. They see gold as a hedge that can support a potential new international order. From this perspective, this trend makes perfect sense.
Gold vs. Bitcoin
David: Comparing gold and Bitcoin, gold is a safer hedge. Bitcoin is more volatile, prone to price pullbacks, and highly correlated with technology stocks. Bitcoin and stocks perform well when investors have a higher risk appetite, which may explain its higher risk profile. What are your thoughts on these views?
Jeff: Many people tend to view volatility as a negative characteristic, but younger people are actually more willing to accept it. This is related to generational differences. They understand that without accepting a certain degree of volatility, wealth growth will be difficult and the opportunity cost will be too high. Ultimately, however, volatility is only part of the investment process; what investors truly care about is the ultimate return .
If you believe Bitcoin will appreciate in the long term, then volatility isn't that alarming. Instead, I'm more concerned about Bitcoin's shortcomings compared to gold in certain areas, such as the issue of self-custody. Most people aren't good at managing their own assets and prefer to delegate this responsibility to others, such as banks or custodians, because they're risk-averse. This is perfectly normal human nature. Bitcoin, however, completely disrupts this model.
To truly own Bitcoin, you need to keep it in your custody, which means accepting the risk of losing everything if you make a mistake. Many people can't handle that kind of pressure. Gold carries similar risks, but the possibility of losing it isn't as extreme as forgetting your Bitcoin private key or having it stolen. After all, gold is a physical asset; it exists in the real world.
So, when people compare gold and Bitcoin, I'm not really concerned about volatility or price fluctuations; I'm more concerned about the issue of self-custody . Many people still prefer to own a physical asset they can touch and see; it feels more reliable. Bitcoin, being a digital asset, can seem a bit abstract, which is why some people still don't believe in its value.
Bonnie: If we let banks manage Bitcoin, wouldn’t that make things much simpler? Wouldn’t that mean everyone wouldn’t have to worry about it?
Jeff: Yes, I think this is a very interesting direction. We need to explore how to integrate Bitcoin into existing business models, mitigating some of the extreme risks, perhaps through insurance, without completely losing Bitcoin's characteristics as a sovereign asset. Once Bitcoin is placed into a custodial model, ownership of the asset is no longer yours, returning to the traditional financial system. Banks and exchanges might then resort to lending and re-hypothecation, which is essentially the same problem we're trying to solve. Therefore, we need to find a way to ensure users feel safe and convenient when using Bitcoin while preserving their ownership of the asset. I believe this is an important area for future breakthroughs in the industry.
Bonnie: Do you think there is a solution now? How close are we to a solution?
Jeff: I think the popularity and rapid growth of ETFs demonstrates that investors can gain exposure to Bitcoin's price without worrying about custodial risk. This allows ETFs and actual Bitcoin holdings to coexist. Many people still need a financialized version of Bitcoin, as it performs well in portfolio management, can be used for margin trading, and can be used for lending. Directly lending Bitcoin carries counterparty risk, but lending a Bitcoin ETF eliminates this issue. Therefore, some of the characteristics of the traditional financial system do have their advantages.
However, this doesn't mean investors shouldn't keep some of their Bitcoin in cold storage. Cold storage is an offline storage method that offers greater security. I believe everyone should experiment with both options to truly understand their respective advantages and disadvantages and applicable scenarios.
Bitcoin ETF 2026 Forecast
David: Bitwise Asset Management recently released a report predicting a significant increase in inflows into Bitcoin ETFs, potentially reaching $300 billion by 2026, and projecting $120 billion by the end of this year, a significant increase from last year. So, why do you believe Bitcoin ETFs will see such significant growth over the next year?
Jeff: This ties into the point you just made. Bitcoin's risk profile used to be strongly correlated with risky assets, but that correlation is weakening. We're seeing Bitcoin's price action gradually decouple from stocks . People are realizing that Bitcoin can perform well not only when market sentiment is positive, but also when risk aversion prevails .
I call this phenomenon "Positive Bitcoin" and "Negative Bitcoin." "Row" is a term used in options trading to describe the fluctuation of an asset's value in response to interest rate fluctuations. Generally speaking, rising interest rates create more challenging market conditions. In this risk-off environment, Bitcoin might be considered a store of value. But historically, Bitcoin has been more of a risk-on asset, right? When interest rates fall, Bitcoin is the fastest hedge against inflation. The key question is whether Bitcoin can sometimes possess both characteristics simultaneously. Over the long term, Bitcoin's price performance has demonstrated its ability to be both "positive" and "negative" in different market environments. This unique characteristic is the essence of Bitcoin's value. The emergence of Bitcoin ETFs allows investors to enter this market in a more structured way. Financial advisors are also gradually recognizing that Bitcoin is no longer a controversial topic but an asset class worthy of attention. This discussion is particularly important in the context of the US credit rating downgrade and the growing concern about fiscal spending.
David: I might not have been clear earlier. ETFs aren't the primary source of funds; overall inflows into Bitcoin are estimated to reach $400 billion. But that's actually what I wanted to ask next. Could you briefly explain the respective proportions of this $400 billion, including ETFs, spot trading, and futures?
Jeff: I believe the ETF market will become very important globally. It's important to note that many countries, such as South Korea, currently don't have a Bitcoin ETF. Therefore, there's still significant room for ETF development globally.
The appeal of ETFs lies in the fact that many investors prefer not to bear the risk of self-custodying Bitcoin, a problem they address. Meanwhile, those who prefer to hold Bitcoin directly can continue to do so, believing it aligns with Bitcoin's original purpose. However, most investors are more focused on maximizing returns. ETFs allow investors to leverage more financialized tools, such as basis trading. Simply put, you can hold spot Bitcoin while simultaneously short Bitcoin futures, profiting from the price difference between the two. This type of trading is easier to implement in the traditional financial system because cross-margining can be performed through prime brokers. However, capital efficiency remains a challenge in the current cryptoasset landscape. Therefore, from a financial operational perspective, ETFs currently offer advantages over directly holding spot assets.
Is Bitcoin breaking through 100,000 an extreme event?
David: If we put the price trend of Bitcoin before 2013 into the model, and suppose Bitcoin reached $100,000 in 2013, would this be a three standard deviation event?
(TechFlow Note: "TechFlow standard deviation events" is a statistical concept used to measure the rarity or abnormality of an event. Here, "three standard deviation events" means that the Bitcoin price reaching $100,000 is an extremely rare event, far beyond the usual price fluctuation range.)
Jeff: That's even a 15 standard deviation event (almost considered "impossible"), and it's already happened. Many people might say that this would take a lot of time, effort, and focus to achieve. But the reality is, we're still on this journey, and we still don't know where the price ceiling for Bitcoin lies. However, I often tell people that investing in Bitcoin isn't always a bet on its price increasing; sometimes it's a bet on the value of fiat currency decreasing. It may sound counterintuitive, but the reality is that Bitcoin's value growth is largely due to the continued devaluation of fiat currencies. I believe that since the global financial crisis, fiat currencies have depreciated much faster than most people expected.
Why are Altcoin falling out of favor?
Bonnie: I think everyone is familiar with Bitcoin. So, if I use Altcoin to replace Bitcoin, will this model still work?
Jeff: I personally feel like we've entered a "Bitcoin or bust" era. Bitcoin's popularity is incredibly high, while Altcoin seem to be still finding their niche. However, I believe that as market structure matures and their financial uses become more clearly defined, Altcoin may find their own value in the future, beyond relying solely on hype and meme trading.
Currently, most people buy Altcoin because of their attractive leveraged volatility. For example, when Bitcoin rises 5%, people assume Altcoin could rise 15%, so they buy Altcoin. However, over the past nine months or more, we've seen this correlation completely break down. Now, Bitcoin can rise while Altcoin can fall. In other words, Altcoin are no longer a leveraged bet on Bitcoin.
Part of the reason behind this is the launch of exchange-traded funds (ETFs). Once Bitcoin ETFs were approved, investors were able to directly trade options on these ETFs starting last December. If you want higher-leverage Bitcoin exposure, trading Bitcoin call options directly is more convenient.
David: The Altcoin market is obviously not as active as it used to be. I guess if I want a high-risk experience, instead of buying some memes, I might try Bitcoin options, which can achieve a similar effect.
Jeff: Exactly. With Bitcoin options, you get the same high-risk experience while still gaining leveraged exposure. And it's safer because you don't have to worry about the complex relationships between Bitcoin and other Altcoin, like its correlation with Helium or Solana. Therefore, Bitcoin options are a good option. Additionally, there are Bitcoin-related companies, like MicroStrategy, whose stock prices are even more volatile than Bitcoin itself. I believe the rise of these companies, like MicroStrategy and Meta Planet, is also attracting more trading volume and diverting market share away from Altcoin. Now, regular investors are more inclined to speculate through these companies and securities because they offer a clearer basis risk while still providing the Bitcoin exposure they desire.
Altcoin Treasury Companies and Bitcoin Treasury Companies
Bonnie: Did you know that there are companies trying to emulate the strategies of Solana and Ethereum? Do you think this approach will work?
Jeff: I'm looking forward to seeing if this approach works. I'm optimistic that it might find some market demand. I think the reason Bitcoin succeeded is because people believe it has value, right? So you can use Bitcoin for lending because people are willing to give it a certain credit value.
This is why this strategy can be leveraged into the credit market: as long as you hold a certain amount of Bitcoin, lenders will consider these assets valuable and recoverable.
First, you have to believe that the collateral behind these assets is valuable, and Bitcoin has proven successful in this regard. You could argue that no other asset in the cryptocurrency space has reached this level, like Ethereum or Solana. Some might disagree, but others would support this view.
This is a worthwhile question. I'm curious to see how these assets are underwritten in the future. However, I can explain why these treasury strategies work. Besides collateralization, they also work if the underlying asset is highly volatile. The leverage created by volatility creates more value for corporate treasuries. Ethereum and Solana are more volatile than Bitcoin, which is an advantage for them.
Furthermore, Bitcoin is currently a relatively static, passive asset. People typically simply store it in cold wallets, like money under a mattress. It neither generates income nor can be used for staking. Ethereum, however, is different. Everyone knows that within the Ethereum network, you need to participate in network security and earn additional returns through the proof-of-stake mechanism. For example, re-staking has become a hot topic. Furthermore, there are other ways to earn returns on Ethereum beyond simply storing it in a cold wallet. While ETFs currently cannot achieve these functions, some operating companies may be able to do so.
Therefore, I believe these assets may become more productive within operating corporate structures, whereas Bitcoin does not rely on these mechanisms. Combined with volatility, these factors could be a potential advantage for Proof-of-Stake tokens like Ethereum over Proof-of-Work tokens like Bitcoin.
Exotic options traders
David: You previously worked as a derivatives trader at Morgan Stanley. What products did you primarily trade back then? I'd like to see how that experience relates to your current work.
Jeff: I started my career at Morgan Stanley, focusing on exotic options, a type of equity derivatives. These financial instruments are so complex that traditional pricing models like the Black-Scholes model can't accurately price them. The Black-Scholes model is a relatively deterministic model, but exotic options require a more complex approach.
For some exotic options, you need to use stochastic models that depend on the path of the asset price and consider multiple local volatility inputs. These instruments include hybrid options, barrier options, and knock-out options. You may not have heard of these names, but they are essentially some of the most complex products designed in the field of financial engineering to meet various insurance or speculative needs.
As an exotic options trader, my biggest concern is the inability of models to accurately capture extreme events. These events are difficult to predict with models, and even with stochastic volatility models, some correlations between key parameters may not be fully captured. For example, when spot prices rise, it typically affects volatility; conversely, when spot prices fall, volatility tends to rise. Models must account for these correlations and path dependencies, but these factors can sometimes be quite volatile.
Perhaps it was this experience that sparked my interest in Bitcoin. My work essentially involves pricing events that are highly unlikely to occur, such as tail options. Exotic options are all about imagining worst-case scenarios, which are often considered unpriceable. You have to assume that tail events (like a triple standard deviation event) are more likely than most people realize. When I first encountered Bitcoin, most people were skeptical, thinking, "This thing looks weird, maybe a little interesting, but it's probably worthless and will eventually go to zero." My natural instinct was to think, what if it doesn't go to zero? If it doesn't, then it could become very valuable. This kind of probability calculation is challenging for many people, because the outcomes are either zero or extremely high, and the probability of either of these happening is very low.
David: When did you first get involved in Bitcoin?
Jeff: I first heard about Bitcoin on a trading floor in 2010. I bought my first three Bitcoins at that time.
Options trading is a very important skill
David: Do you have any advice for retail investors who are watching? For example, some people might be interested in trying options trading and are curious about entering this market. What advice would you give to these beginners?
Jeff: I would tell every beginner that learning options trading is a crucial skill at this stage. I say this because options trading isn't just an investment approach; it's a mental model. It teaches you to view the world from a probabilistic perspective, which is incredibly helpful. Our culture tends to oversimplify things, to make them either "right" or "wrong," "left" or "right," leaving little room for nuance. But the world is actually full of nuance, and options trading can train you to focus on the distribution of possible outcomes, allowing you to see things more holistically.
Options trading offers a significant advantage to retail investors because it provides significant leverage, a type of leverage rarely available to institutional investors. In my opinion, options trading is the only area where retail investors can outperform institutions. The reason is simple: institutions typically trade options on a large scale, and this scale influences market prices. However, for retail investors, buying a small number of options contracts doesn't affect prices, nor does it force others to adjust their strategies based on your position.
I've always told everyone that it's difficult for retail investors to outperform institutions in many areas. The rules aren't very friendly to retail investors. For example, they don't understand order flow or the workings of a central limit order book. Options trading, however, is an exception. Here, the small size of retail investors can actually be an advantage. Therefore, I believe everyone should take the time to learn about options trading.
Furthermore, Bitcoin is one of the most leptokurtic assets in the world. Leptokurtic means its price fluctuations are highly concentrated and intense. If you're bullish on Bitcoin, I believe investing in it through options is a very worthwhile approach, especially for those with a long-term investment horizon.
Assets that can "convert time"
Bonnie: Going back to what you mentioned on Twitter, you said some assets can “convert time”, what does that mean?
Jeff: That's a good question. I believe time is a form of energy, and this energy can be converted into value. Bitcoin, to some extent, embodies this concept beautifully through its Proof of Work system. Simply put, mining Bitcoin requires a significant investment of time and energy, ultimately resulting in a block reward. It's like a battery that stores effort: you invest time and energy, and the system returns value.
The logic behind this is that time and energy are both scarce resources, and scarcity itself creates value. I think this concept can also be applied to other areas, such as human capital. Human capital is also scarce, but through proper utilization, it can also create considerable value.
I often use the example of professional gambling. I'm not referring to the kind of gambling that relies solely on luck, like slot machines, but rather professional gambling, which relies on skill to generate positive returns.
Take poker, for example. If you're a good poker player, you typically earn a positive expected value (EV). This means your time and energy are valuable, and this income has nothing to do with the stock market or interest rate policy. It relies entirely on your human capital and skills. A similar example is sports betting. Sports betting is considered one of the most complex markets because information advantages (such as in-depth research on match outcomes) can help smart bettors win. Some professional sports bettors can even outperform bookmakers. In fact, bookmakers rely on these top bettors to help create market equilibrium. If you're a professional sports bettor, this type of income is also earned through hard work and skill. I believe that this type of income generated through investment of time and effort should be a very important part of your investment portfolio.
Assets on-chain
Bonnie: You mentioned art and cards earlier. Wouldn't it be more convenient if these things could be traded on the blockchain? Does this mean you believe in the concept of RWAs (real-world assets)? However, some people disagree, believing that art should be hung on a wall and gold should be tangible. What are your thoughts?
Jeff: I think RWA is a very attractive trend, and different people have different understandings of it. In my opinion, RWA has two main development directions.
The first is tokenizing existing financial assets. For example, traditionally illiquid assets like private equity and private credit can be made more tradable through tokenization. This makes assets that were previously illiquid in secondary markets more liquid, and tokenization is key to achieving this goal. This is a typical application of RWAs.
The second, more interesting direction is for assets that have never been traded or securitized. Think of trading cards or sneakers. These things trade heavily, but they weren't designed to be traded. If we can find new liquidity for these assets through tokenization, that would be very meaningful.
For example, companies like StockX specialize in sneaker trading, but logistics are a significant cost, including shipping, storage, and insurance, all of which are ultimately passed on to consumers. On-chain tokenization, however, allows for entirely new business models. For example, through digital certificates, ownership can be transferred without physically moving the asset. This significantly improves transaction efficiency and reduces costs.
Take the watch market, for example. It's a huge and valuable market, but also plagued by fraud. Therefore, ensuring authenticity is crucial. Tokenization allows you to create a marketplace where buyers can trade ownership of watches without having to physically move the watch. This approach is highly efficient if the ultimate buyer is simply investing or trading rather than actually wearing the watch. Furthermore, the physical asset remains accessible, and this tangible quality gives it value.
David: I want to talk about the opposing view. A few years ago, some people started trying to tokenize physical assets like Rolex watches. But most of these digital assets eventually went to zero, while the Rolex itself still cost $25,000. So, do we really need this kind of digitization? We don't need to digitize existing physical assets. This is a counterargument. What are your thoughts? If you look at past cases, many digital assets have ultimately gone to zero, right? While the actual physical assets have maintained their value?
Jeff: I think what you're trying to say is that these digital assets don't offer ownership of physical assets, right? They're more like virtual assets in the metaverse. If that's the case, then they're indeed metaverse assets. I'm discussing another scenario here, where NFTs make it easier to trade physical assets. This model hasn't seen much success in the crypto space yet, but I think it's worth exploring when the time is right. Of course, the costs of this approach also need to be considered.
Lessons Learned at Morgan Stanley
David: What lessons did you learn from your experience at Morgan Stanley? How do these lessons apply to your trading today?
Jeff: I learned a lot at Morgan Stanley, and some of the rules have particularly impressed me. For example, the first rule is "Don't make mistakes," and the second is "Always remember the first rule." These lessons are also applicable to the cryptocurrency market. The cryptocurrency market is full of experimentation and speculation, and many opportunities seem attractive but are actually very risky. Therefore, I am more cautious when approaching these new opportunities because there are many external risk factors in the market, and even some seemingly reliable protocols can fail. These rules at Morgan Stanley act like a "demon" to constantly remind me to think twice before making decisions. This is why I consider myself to be a Bitcoin maximalist to some extent.
Bonnie: So you also went through a phase of buying Altcoin, right?
Jeff: Of course, I've also bought Altcoin. What's interesting about participating in these exchanges is that cryptocurrency code is "live," changing with protocol upgrades and token economics adjustments. Sometimes you need to swap one token for another, and if you don't do it in time, you might miss out. Crypto assets don't have the kind of agent services that traditional finance uses to remind you, like a letter saying, "You need to do something by a certain deadline." They often just tweet on social media, and if you don't see it, you might miss out on important information.
This is one of the reasons why many investors face challenges in the cryptocurrency space. The crypto market requires constant monitoring, unlike traditional finance, which has a clear notification system. Sometimes, you regret forgetting to stake a token two years later.
The cryptocurrency space is changing rapidly, and many once-major projects have experienced both rise and fall over the years. This has made me realize that investing in cryptocurrency requires not only patience but also constant monitoring of market changes.
What will you give your child when he or she gets married?
David: I have another question. Let's see if we can make this more interesting. I'm not sure I can, but let me try. The pressure is on. You mentioned receiving gold as a gift at your wedding. What would you give your children when they get married?
Jeff: As is family tradition, I'll pass on the gold to them, but I also hope to bring Bitcoin into this conversation. Speaking of which, I'm reminded of something interesting. My five-year-old son is around a lot, and he's heard my wife and I talk about Bitcoin. Sometimes when we talk about Bitcoin at the dinner table, he'll ask me, "Dad, how much is Bitcoin worth now?" He doesn't have a good grasp of large numbers yet, so he doesn't yet understand the concept of 100,000 or 90,000.
David: You can explain it to him using Pokémon cards, like telling him how many Pokémon cards he can buy with this amount of money.
Jeff: Yeah, that's a good idea. But I don't really do that. I do have a funny story to share. My son was recently trading Pokémon cards with his friends, and he traded some of his authentic cards for fake ones you can buy on Amazon. Those fake cards are made in China, and even though they're fake, they look really beautiful and shiny, and they look even more valuable, right? So he showed them to me with great pride, saying, "Dad, look at these beautiful golden cards!"
I didn't want to tell him directly that the cards were fake, so I used the concept of Bitcoin to explain it to him. I told him that the blue cards were the real, original cards, and they were as scarce as Bitcoin, making them perfect collateral. He was familiar with the concept of "perfect collateral" because I had used the term to describe Bitcoin before. So now he understood that the blue cards were the most valuable, and he said, "This is perfect collateral. I won't trade it again."
Click here to learn about BlockBeats' BlockBeats job openings
Welcome to join the BlockBeats official community:
Telegram group: https://t.me/theblockbeats
Telegram group: https://t.me/BlockBeats_App
Official Twitter account: https://twitter.com/BlockBeatsAsia
