--- title: 'Crypto Investment Framework' category: investing tags: - investment published: true date: 2025-08-11 13:22:04 description: 'I have no short-term alpha, so I went from bottom-up to top-down. The crypto-dollar-AI cycle, fed by stablecoin demand for Treasuries, is my alpha for 3-5 years.' --- # Introduction: A Shift in Investment Perspective For a long time I mostly did short-term investing, but overall my win rate and returns were very poor. I don’t think I had any real strength in reading financial statements, in technical chart analysis, or in spotting and getting into early-stage projects ahead of the crowd. The honest, meta-cognitive conclusion was that I have no exceptional investment alpha. That wore on me, and it left me badly exposed to price volatility. I’ve come to see this as a clear limitation of the bottom-up approach, which looks only at the fundamentals of individual assets. The biggest variable in today’s market seems to be not the performance of individual companies or assets, but the shift in the macroeconomic and geopolitical paradigm itself. So I built a **top-down framework** that goes after structural returns by riding the world’s great currents, and I’m now investing over the mid to long term on that basis. My framework for thinking is as follows: # 1. Grasping the Past-Present Context First, I try to look from a big-picture perspective at how the world’s political, economic, and social issues connect to and influence one another. ## a) All Roads Lead to ‘American Hegemony’ and Its Dilemma. Historically, the United States has mobilized every means to maintain its overwhelming hegemony, above all its ‘dollar hegemony.’ Right now it faces two enormous challenges. - **Weakening demand for U.S. Treasuries: **As the U.S.-China conflict has intensified, China has continuously sold off its holdings of U.S. Treasury bonds. This is a direct attack on the dollar system. Traditional allies such as Japan have also reduced their Treasury purchases, weakening the demand base that props up America’s debt. - **Expanding fiscal spending:** The Trump administration’s ‘MAGA’ agenda aims, alongside a manufacturing revival, to seize hegemony over next-generation technologies such as AI and quantum computers. This requires enormous fiscal spending, but a lack of buyers for Treasuries has created a serious dilemma in raising funds. The United States needed extraordinary measures to resolve this dilemma and to create the ideal economic environment of a ‘three-lows boom’ (low inflation, low interest rates, low oil prices). ## **b) ‘Stablecoins’ as a Strategic Tool** This, I think, is exactly where the crypto market’s ‘stablecoins’ come in. More than a mere technological innovation, they’ve emerged as the perfect ‘strategic tool’ for resolving America’s fiscal and structural dilemma. - **A structural solution:** Under regulation, stablecoin issuers (Circle, Tether, etc.) must hold reserves equal to the amount issued. The vast majority of these reserves (roughly 90% or more) consist of highly liquid and stable short-term U.S. Treasuries. - **The logical consequence:** The growth of the stablecoin market translates directly into ‘new and controllable’ large-scale demand for U.S. Treasuries. This plays a key role in offsetting China’s Treasury-selling offensive, laying a stable foundation for fiscal spending, and ultimately consolidating dollar hegemony. I read the U.S. rush to pass related legislation like the ‘GENIUS Act’ as resting on exactly this strategic calculation. # 2. Predicting the Future: A Deliberately Designed ‘Crypto-Dollar-AI’ Virtuous Cycle Based on this analysis, I predict that the market going forward will be driven by the following ‘deliberately designed virtuous cycle.’ 1. **Continuously fostering a pro-crypto environment:** The prerequisite for growing the stablecoin market is invigorating the crypto market itself, where stablecoins are used (roughly 90% of stablecoin trading volume occurs on exchanges and on-chain). I read Trump talking up memecoins, and influential political families piling into crypto businesses, as a highly strategic act that sends the public the most powerful and intuitive signal possible, that ‘crypto is now safe and investing in it is permitted.’ 2. **A crypto boom and a surge in stablecoin demand:** In this atmosphere, institutional and retail capital flows in, and the crypto market enters a structural boom. Crypto trading and transfer activity surges, and demand for stablecoins will increase exponentially. (The current market capitalization of roughly $200 billion is projected to grow about 7 to 8 times within the next five years.) 3. **Securing Treasury demand and redistributing capital:** The surging demand for stablecoins flows directly into purchases of U.S. Treasuries, resolving America’s fiscal problem. The enormous funds secured through Treasury issuance are intensively channeled into the ‘AI industry,’ on which the next generation’s hegemony hinges. The result is one enormous virtuous cycle: **`crypto boom → rising stablecoin demand → stable U.S. Treasury demand → AI industry investment → strengthened tech hegemony → consolidated dollar hegemony`**. I think this structural current will be the key engine driving investment alpha for at least the next 3 to 5 years. # 3. Connecting to Investment Strategy I don’t see the current market as disorderly volatility, but as a period of paradigm transition intricately engineered to preserve American hegemony. - Interest rates worldwide, including in the U.S., have entered a cutting cycle, and a wave of liquidity is on the horizon. So it makes sense to hold assets rather than cash. - Understanding this enormous structural current and investing for the long term in the assets positioned at the heart of the** ‘Crypto-Dollar-AI’ **cycle will be the strategy most likely to beat the market over the coming years. - Since I see the beneficiaries as the crypto market as a whole, centered on Bitcoin (the institutionally recognized market leader + the public’s FOMO over its scarcity) and Ethereum (the core issuance hub for global stablecoins), I keep increasing my allocation to these assets. ## Discarding Prior Views - **Discarding the four-year halving-cycle top thesis:** I’m dropping the old four-year halving-cycle view that the top arrives around October ’25. I no longer see this as a miner-led market. - **Discarding the Bitcoin-network-unsustainability thesis:** I’m also dropping the view that Bitcoin’s halving cuts miner incentives to the point where the network can’t be sustained. As things stand, institutions will keep the network running even if that means mining directly themselves. ## Selling and Other Asset Strategies - **Selling criteria:** I’ll gauge when to sell by how manic the market is and where Bitcoin’s market capitalization stands, and I plan to sell in installments. - **Stablecoin-related stocks (e.g., Circle):** These can be good investments, but they’re vulnerable to exchange-rate swings. With the U.S. moving toward a low-interest-rate stance, profitability at Circle, which draws roughly 90% or more of its revenue from short-term U.S. Treasury yields, could weaken. Competition for market share among stablecoin issuers matters too. Over the long term I’m positive on the market itself, but I plan to look at investing once it reaches a reasonable valuation. # Conclusion Plenty of variables will come up on the road ahead, but each time I’ll run them through the framework above and correct for error. What I do ignore is short-term noise that isn’t a fundamental, structural problem.