Jeff Walton: Bitcoin Treasuries & The New Credit Paradigm | Bitcoin Asia 2025

Summary

In his talk at Bitcoin Asia 2025, Jeff Walton explores the evolution of risk and how Bitcoin-backed assets are transforming the landscape of finance. Drawing from his background in reinsurance, Walton traces risk from ancient superstitions to modern data-driven frameworks. He highlights how Bitcoin, as a volatile asset, is being structured into diverse financial products to attract major capital pools. Walton discusses how these innovations in risk management could drive Bitcoin's growth and adoption, positioning it as a key player in the global finance ecosystem.

Takeaways

• 😀 Bitcoin is a major financial innovation shaping the future of finance, and its adoption is driving new ways of managing risk.
• 😀 The speaker, Jeff Walton, brings a unique perspective as the VP of Bitcoin Strategy at Strive with a background in reinsurance and risk management.
• 😀 The evolution of risk has been shaped by technological advancements from ancient times to the present, moving from superstition to data-driven decision making.
• 😀 The industrial revolution and the rise of probability theory helped turn risk from a fear-based concept into a manageable, calculable part of society.
• 😀 The rapid technological innovations of the 20th century, such as cars, airplanes, and space travel, led to new risk landscapes that had to be managed.
• 😀 Since the 1970s, the financial industry has rapidly adopted computers, algorithms, and digital assets, increasing the speed and complexity of risk management.
• 😀 Bitcoin-backed risk is an innovative approach to quantifying and managing the risk associated with Bitcoin's volatility, making it more palatable for institutional investors.
• 😀 Strive's strategy uses Bitcoin as a reserve asset and transforms it into various securities with different levels of risk, allowing for tailored risk profiles for different capital pools.
• 😀 The risk landscape has evolved with digital advancements, introducing new types of risks such as cyber attacks, digital vulnerabilities, and coding assumptions.
• 😀 The financial instruments developed by Strive offer attractive yields, high liquidity, and clear risk quantification, making them highly appealing compared to traditional fixed-income products.
• 😀 The market size and potential for Bitcoin-backed securities is enormous, with the potential to attract the massive capital pools of fixed income and real estate markets, positioning Bitcoin as a trillion-dollar asset class.

Q & A

What is the main focus of Jeff Walton's presentation in Hong Kong?

The main focus is on the digital transformation of risk, especially in the context of Bitcoin-backed financial instruments and how risk has evolved over time.

How does Jeff Walton describe the evolution of risk from ancient times to the present?

Risk was initially seen as being governed by fate and superstition in ancient times, then evolved with the introduction of gambling, mathematics, and probability theory. It continued to evolve with the Industrial Revolution, technological advancements, and the rise of digital risk with the advent of computers and cryptocurrencies.

What role did gambling play in the development of risk management?

Gambling played a key role by introducing probability theory and mathematics as tools for understanding and managing uncertainty. This eventually led to the development of frameworks for risk management and the creation of modern insurance systems like Lloyd's of London.

What technological innovations in the 20th century influenced the view of risk?

The rapid advancements in transportation, communication, medicine, and finance (such as airplanes, cars, radio, and credit cards) created new types of risks. This also led to innovations in financial risk management, including the development of models like Modern Portfolio Theory and the Capital Asset Pricing Model.

How has the digital age transformed risk management?

The digital age has introduced new types of risks, such as cybersecurity threats, digital information vulnerabilities, and the risks associated with algorithms and AI. It has also made it possible to quantify and manage risk in new ways, leveraging computer models and simulations for real-time risk assessment.

What is Bitcoin-backed risk and why is it significant?

Bitcoin-backed risk refers to the financial risk associated with Bitcoin, an inherently volatile asset. The significance lies in how companies are transforming Bitcoin's volatility into structured financial instruments that can appeal to different types of investors, helping to manage and distribute risk.

How does Strive's capital stack work in managing Bitcoin-backed risk?

Strive has created a layered capital stack, where Bitcoin is held on their balance sheet and transformed into different risk instruments with varying levels of volatility and seniority. These instruments are designed to appeal to different capital pools by offering different risk/return profiles.

What is the purpose of the BTC rating in Strive's risk management strategy?

The BTC rating indicates the amount of Bitcoin collateral backing each instrument in the capital stack. This helps investors understand how likely it is that Strive could meet its obligations, with a higher BTC rating indicating a greater buffer against Bitcoin price fluctuations.

How do Strive's risk instruments compare to traditional fixed income markets?

Strive's Bitcoin-backed risk instruments are more liquid and yield higher returns compared to traditional fixed income markets. These instruments can be calculated and monitored 24/7, unlike traditional securities that require quarterly updates and are less liquid.

Why is the fixed income and real estate market size significant in this context?

The fixed income and real estate markets are the two largest capital pools globally, with a combined value of over $600 trillion. Strive's Bitcoin-backed securities are providing a product market fit for these massive capital pools, making Bitcoin more accessible to large institutional investors.