Source: "When Shift Happens" podcast

Compiled by: Felix, PANews

Bitwise advisor Jeff Park is a macro strategist and was also the Chief Investment Officer of ProCap Financial. Recently, he analyzed in a podcast why real estate is actually a depreciating asset, why Bitcoin is the ultimate safe haven, and how AI will trigger a wave of Bitcoin adoption. Jeff Park believes that for young people, the financial system has completely collapsed, from unattainable housing to AI replacing an entire generation's jobs.

PANews has compiled key highlights from the conversation.

Host: You told me earlier that you encountered the concept of "currency depreciation" early on. Can you elaborate on that?

Jeff Park: Of course. I grew up in both the United States and South Korea; I spent my elementary years in Korea and experienced the Asian financial crisis in 1997. That crisis left a deep impression on me as a second or third grader because I witnessed the absolute unity of a country when it could not control its own fate. It was remarkable to see how people, from neighbors to strangers in the streets, came together over a shared nationalism directly related to the value of sovereign currency. A similar event for Americans might be "9/11," which united people across political lines and social classes to ponder "what it means to be American." In South Korea, the complete devaluation of the currency served a similar purpose of uniting the country. I clearly remember the South Korean government urging citizens to donate gold to restore the treasury to repay the IMF (International Monetary Fund) bailout loans, given the extremely harsh terms of those loans. In emerging markets like South Korea, the IMF is seen as carrying heavy political connotations, which may have also contributed to my entry into the crypto space 20 years later.

Host: You mentioned that the currency devaluation you experienced as a young person united people. But that was in Asia; what is happening in the U.S. now? Can people really unite?

Jeff Park: I think America's great strength is also its biggest weakness: diversity of its population. Asian commentators often predict that "the diversity of the population will destroy America." In Korea, achieving national cohesion is easier because everyone is Korean, bonded by a shared history of resisting colonial oppression. But in America, it is hard to pinpoint a clear bond that could instill a sense of sacrifice across society. Sacrifice is the keyword. For instance, in Korea, all males, regardless of class or educational background, must serve in the military, which creates homogeneity among men. In America, it is challenging to identify what constitutes the typical "American experience" that would unite everyone. Politics often draws lines between left and right, upper and lower classes, young and old, but I think these are just distractions. What is truly lacking and needs to be cherished is a sense of national identity and unity among the younger generation.

Host: You entered the workforce during the 2008 crisis, followed by several years of accelerated money printing. Now we live in New York, this world financial center, where everything is outrageously expensive. I'm Swiss and now living in Singapore, so I’m used to high prices, but it’s still hard to believe here. How do ordinary people survive? People can clearly feel inflation in recent years; what has happened?

Jeff Park: Yes, what we see is a completely out-of-control, utterly collapsed financial system. The lower levels of society are experiencing a "K-shaped economy." A "K-shaped economy" means that a portion of people is enjoying economic prosperity due to asset inflation, while another portion is experiencing decline; they cannot find jobs, and the wealth gap is continuing to widen, hence the K shape—it's a dual-track economy.

In New York, you can see this clearly through the asset class of real estate. Over the past 10 years, the average home price in New York City hasn't actually increased; it has remained flat. Those "super luxury homes" that serve as value storage are selling very well. They are not bought to live in but instead acquired by the wealthy as assets to maintain value on their balance sheets. If you bought a penthouse for $20 million seven years ago, you might be able to sell it for $30 million today. However, if you bought a regular home intending to actually live in it, support a family, and contribute economically to the city, the price has actually decreased or remained flat. For example, New York has a "mansion tax" that applies to properties over $1 million. Decades ago, a million could buy a mansion, but now in New York, a million can only buy a studio apartment. The government deliberately does not link this tax to inflation to collect more taxes. New York is a paradox, and all of this symptoms arise from a lack of quality, value-retaining assets.

Host: Why has real estate become like this?

Jeff Park: Land is inherently scarce. The U.S. enjoys the absolute privilege of operating the global financial system; the dollar is its largest export product, but there is a cost: offshore capital must ultimately flow back and be invested in U.S. assets to maintain the trade deficit. This creates an artificial, bubble-like market for U.S. assets where overseas investors only need a place to park their funds. This leads to a severe issue: the pricing incentives of this market have nothing to do with us who truly live in New York and want to have a stable life.

Host: For someone aged 30 to 35 who has saved some money, what should they invest in? I feel like a million dollars is a lot of money, but in New York, it can only buy an apartment, and you tell me I must buy a $20 million penthouse to make a good investment. How should our generation view the old concept of "buying a house as an investment"?

Jeff Park: The rising prices of real estate are not due to the physical value of the houses increasing, but because the dollar is continuously depreciating. If you think about it carefully, real estate is a capital expenditure that requires ongoing maintenance. Buildings weather over time; you must pay property taxes, mortgage taxes, maintenance fees, and homeowners insurance. Houses are, in fact, depreciating assets, and U.S. tax law even allows real estate investors to write off depreciation over 20 to 30 years. People view buying a house as a primary saving method because it is tightly bound to social functions, like the need to pay high property taxes to secure enrollment in public schools for children. Currently, real estate is facing two massive issues: liquidity transformation and demographic shifts. Did you know that today, the average age of Americans applying for a mortgage is 59? This is clearly not first-time homebuyers but rather sixty-year-olds buying their third or fourth homes. This directly squeezes out those 25-year-olds who want to buy their first home and start families; young people's access to homeownership has essentially been blocked. Additionally, when New Yorkers move to Austin, Texas, due to high taxes, local Austinites are also angry because their home prices have been driven up by New York's capital. This is an issue of capital control, completely pushing young people out of the market.

Host: As a rational man in his 30s, I work, have a girlfriend, and plan to get married and have children in the future, which requires a house. But you tell me that buying a house is actually a bad investment. I only have $100,000 or $500,000 in savings; what should I do?

Jeff Park: To be honest, in a core city like New York, renting is absolutely the economically smarter choice. When you own a home, all the taxes, fees, and insurance would eat up your capital return rate to less than 2% or even under 1%. You might as well put your money in a money market fund and earn a risk-free 3.5%. Buying a home is essentially betting that home prices will rise. Therefore, for young people without kids, continuing to rent is the most financially sound outcome. But once you have kids, you need stability and to send them to school, and you are forced to pay a high "premium" to buy that peace of mind. It is no longer just an economic calculation. This is why modern young people are reluctant to have children because once they do, they cannot continue renting, breaking the whole cycle, which brings excessive pressure. In Asia, like Japan and South Korea, there’s a common phenomenon where young people are anxiously waiting for the wealth transfer from the older generation, but the older generation lives longer, creating a vast social friction between the two generations.

Host: Do we just have to despairingly wait until we are 60, hoping our parents leave us some property? Is there no other way out?

Jeff Park: There is. There is now a better way to preserve wealth than real estate. This form of wealth does not require servicing, occupies no space, requires no maintenance, and is not taxed every time, and that is Bitcoin. Bitcoin will directly alleviate the pressure on the real estate market. That billionaire who ran to New York to buy a $40 million penthouse to transfer $50 million can now buy Bitcoin directly. You don't have to pay massive annual maintenance fees, nor worry about the government exercising "eminent domain" to seize your property at will. Once this hot money that retains value stops flooding into real estate, the demand curve will reset, prices will decrease, and young people will be able to afford homes. Although there will be pain in the short term from falling real estate prices, overall it is a win-win for society. This is also why Michael Saylor refers to Bitcoin as "digital real estate," just like Manhattan land a century ago. Capital naturally consolidates where efficiency is high; if you do not provide it with an outlet, society will eventually collapse.

Host: You mentioned the term "smart investor" in your writings; what is a "smart investor"? Why have they declined?

Jeff Park: A "smart investor" refers to value investors like Buffett or Benjamin Graham, who look for stocks that are extremely cheap relative to cash flow and have low price-to-earnings ratios. However, I believe that era has ended. Because the best-performing assets now are not "cheap" things but those that have "scarcity" and are perceived to contain additional value. The entire framework of the "smart investor" is built on an assumption: that everything must be priced according to the "risk-free rate" (i.e., U.S. Treasury bonds). But due to challenges to the U.S. government's creditworthiness, the foundation of the risk-free rate has been shaken. This is also why the traditional 60/40 (stocks/bonds) investment portfolio has failed, with increasingly high correlations between U.S. Treasuries and U.S. stocks. Once you remove the risk-free rate as a valuation anchor, the market becomes a chaotic brawl.

Host: Then what is an "ideological investor"?

Jeff Park: Traditional value investors attempt to hedge against the impacts of geopolitics, AI, and culture to find so-called intrinsic value. In contrast, "ideological investors" dive right in; they spend a lot of time predicting the future, focusing on the flow of funds and the paradigm shifts in liquidity. They understand that the U.S. government is personally buying assets, so they buy what “White House asset management companies” would buy. They know how to identify asset manipulation and avoid traditional valuation traps.

Host: This sounds like something a Chief Investment Officer (CIO) would do. Can you explain it in a way that regular people can understand?

Jeff Park: Actually, regular people are very good at this. They know that what is truly valuable is not the Apple stocks in their brokerage accounts but rather valuable physical items, like their unique jewelry, or that Hermes bag in their closet (which has outperformed the S&P 500 index for the past 20 years). Or some great works of art. These items, traditionally not called financial assets, are the true wealth diversification tools.

Your financial advisor will only teach you to buy the 60/40 stock-bond portfolio, private equity, or venture capital, but these are essentially the same—it’s all constrained by the same "global arbitrage trade" and risk-free rates. What you need are assets from another pool, those that are never touched by macro cycles—this is the true form of de-correlated diversification. Cryptocurrencies, gold, Hermes bags, limited edition sneakers, and Pokémon cards fit into this category. I also believe that a major future asset class will be "data." Young people have realized that they have been exploited for their data by Facebook, and in the future, they will manage and monetize their data using decentralized technologies (such as prediction markets). Wall Street advisors will definitely not teach you how to play the prediction markets, but this will be the trend because young people know that the traditional financial games are rigged, and they are longing for alternatives, which is also why Bitcoin, DeFi, and sports betting are on the rise.

Host: Macro economist Raoul Pal said, "diversification is dead," and that the performance of all assets is only related to money printing and fiat currency devaluation, so he is entirely invested in cryptocurrencies. What do you think?

Jeff Park: I both agree and disagree. If you only focus on traditional assets manipulated by the same global liquidity system, then diversification indeed becomes meaningless. But if you broaden your perspective to include investment categories that are not manipulated by that fund flow, diversification still holds value. Last year, I proposed the "radical portfolio theory," listing 25 different uncorrelated assets. For example, gold, which is still the most primitive form of non-replaceable value storage in Asian cultures. For instance, in the art assets category during the 2008 financial crisis, the best trades were in art. There are also people trading scarce high-end wines. I am very optimistic about the "tokenization" in the cryptocurrency sector, but my original intention is not to tokenized BlackRock’s funds but to tokenize long-tail alternative assets with extremely high thresholds, such as wine and super yachts. That way, ordinary people, even without millions, can invest a small amount, like $100, to buy a tiny share of that yacht and achieve hedge investment portfolios like billionaires.

Host: But this is still too complicated for ordinary people. For instance, my 35-year-old sister is just an ordinary worker; how can she accumulate wealth?

Jeff Park: Over the past 20 years, young people have become more financially savvy. When you see many young people trading limited-edition sneakers and Pokémon cards, don’t find it amusing. This is precisely the type of diversified wealth thinking that young people need, rather than blindly chasing high shares of Nvidia stock. Young people are playing their own game, and if they succeed in it, that will be very powerful.

Host: There is also something that is causing people to even lose their jobs: AI. You wrote an article called "Occupy AI." Can you first explain what "Occupy Wall Street" was and then discuss "Occupy AI"?

Jeff Park: In 2008, there was the "Occupy Wall Street" movement, where angry citizens camped in downtown New York demanding justice. Because during the subprime crisis, banks were morally and legally at fault, privatizing profits while socializing losses (making taxpayers rescue) without facing consequences. I believe that AI will trigger a potentially more exaggerated class struggle. We have never encountered a technology as disruptive as AI, which can completely replace labor while bringing record profits to corporate executives. We will see an even more extreme K-shaped economy, where corporate profits rise not due to increased revenue, but through layoffs that reduce labor costs. As I wrote in my article: "While Amazon hit a new high in the stock market, it laid off 30,000 workers, illustrating the collapse of the pricing of free will and the surge of the value of self-determination."

Host: Can you explain what that quote means?

Jeff Park: People work not just to earn money; they also desire productivity, to contribute to society, and to be role models for their children. If people do not generate value, psychological issues will arise. Past technological advances (like electricity, automobiles, railways, email) all amplified human capabilities, letting you work faster and better, but the key is that you were still working. However, certain aspects of AI completely eliminate jobs. More unsettling is that to support the construction of AI data centers, some are calling for the government to provide backing, packaging it as a "survival crisis if we do not get involved," thus using funds to invest in technologies that will replace domestic taxpayers' jobs. Do you think the public will support such a self-funding plan leading to self-destruction? This is why "Occupy AI" is bound to happen.

Unlike the clear enemies in suits on Wall Street wearing Hermes ties, AI is intangible. Tech giants will just say, "We are just a platform." Today's young people graduate with huge student loans, can’t find jobs, cannot afford homes, and might not even have jobs indefinitely. Meanwhile, tech giants are swapping clients amongst themselves, with funds flowing between Microsoft, OpenAI, Anthropic, Nvidia, creating new highs in U.S. stocks, which is absolutely an extremely abnormal phenomenon.

Host: At the end of your article, you wrote, "Occupy Wall Street turned the millennial generation into staunch Bitcoin supporters, whereas Occupy AI will turn Generation Z and Generation Alpha into Bitcoin supporters." Can you explain that in simpler terms?

Jeff Park: Everyone has a moment of "awakening" or "epiphany" when they discover Bitcoin. For many millennials, that epiphany came during the 2008 financial crisis and the insane money printing during the COVID-19 pandemic because we recognized that the existing monetary system is a scam. But for Generation Z and Generation Alpha, currency devaluation has already failed to pique their interest. They have been disillusioned and desperate for a long time, fully aware that the system is irreparably broken. Additionally, as institutions like BlackRock buy more Bitcoin, they even feel that Bitcoin has become an "old person's game." But I believe AI will be the catalyst for their awakening. This generation will be competing with AI for jobs right out of school, which touches upon their deepest personal interests. They will find that Bitcoin is the best safe-haven asset. Furthermore, if they believe AI is causing significant negative social impacts, they will vote with their feet. Both AI and Bitcoin are extremely energy-consuming; they may choose to support Bitcoin.

Moreover, the core of AI is centralization—it collects your data and uses it to replace you. If your data is used to train smarter models, you must be compensated as a result. The only theoretical way to realize this ownership tracking and value distribution is through decentralized cryptographic technology. This may ignite a rediscovery of the "decentralization" of cryptocurrency among young generations. I remain optimistic about AI benefiting society, but only if the issue of "data contribution compensation" is resolved.

Host: Many may feel that Bitcoin's current fluctuation between $60,000, $70,000, or even several hundred thousand dollars is too expensive, and they have missed the last opportunity to buy in. What are your thoughts on this?

Jeff Park: I think people need to consider more: if you do not hold Bitcoin, what kind of downside risk are you facing? If you do not hold Bitcoin, you are essentially shorting Bitcoin. Fiat currencies are depreciating at an unprecedented rate. Looking back at history, when the fiscal deficit of the dollar reaches an uncontrollable escape velocity, you must allocate "the fastest horse"—that is, Bitcoin—into your portfolio, or assets like Hermes, Rolex, etc., that can withstand global arbitrage cycles.

Host: As a CIO who emphasizes diversification, for those holding large amounts of Bitcoin in their investment portfolios as savings, would you recommend a defensive or offensive approach?

Jeff Park: Many people in the field adopt a "barbell strategy," half Bitcoin, half cash in a money market fund, buying nothing else. Personally, I prefer to have a more diversified asset allocation. But If you really force me to keep only two assets in the portfolio, my choices would be: first, Bitcoin. Because it is the asset least correlated with global capital markets; second, you still need income-generating assets within the dollar system. For instance, I believe we will eventually return to a zero-interest-rate environment (to maintain the operation of the global leverage game through interest rate cuts), so buying 30-year U.S. Treasuries now is a great investment opportunity, as bond prices will rise when rates fall. This is essentially a bet that America’s innovative capacity will ultimately solve the problems.

Host: How do you use the Bitcoin mindset to educate your two children to face a future dominated by AI?

Jeff Park: Bitcoin has taught me one thing: always remain open and humble, because this world is bigger than any individual or model. It is a living experiment. One phrase I often tell my kids is that practice does not make perfect; practice makes progress. Bitcoin will never be absolutely perfect; nothing is, but we can continuously improve in the pursuit of ideals.

Related Reading: Dialogue with a Former Google Executive: AI is Humanity's Last Innovation, Embrace It and Seize the Opportunity

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