In 2023, Arthur Hayes and Akshat Vaidya, the former head of corporate development at BitMEX, co-founded Maelstrom Capital, an investment institution, with Vaidya serving as investment director. Maelstrom was set up as Hayes’ family office, and the funds came from Hayes. Because it did not need to deal with LPs (after all, it was all Hayes’ money), and it was not in a hurry to allocate capital to earn management fees, so it had enough “patience.” This also allows the market to see the different investment styles of family offices and VC institutions.
Hayes said: “We want to find those projects that are really high quality. This is not a ‘spray and pray’ game (referring to casting a wide net for investment and then praying that a project will succeed), because we do not have external LPs (after all, we are all It’s your own money, so be careful)”. At a time when the market is maturing but there is still no clear path forward, BlockBeats had the honor to interview Akshat Vaidya, co-founder of Maelstrom, and discuss with him the development of family offices in the encryption field and their understanding of the market.
In the interview, BlockBeats asked Maelstrom whether he would participate in the current hot market trend of buying meme coins. Akshat replied that they are not directly involved in meme currency transactions, but indirectly acquire memes by investing in infrastructure that supports the creation and dissemination of meme coins. The value brought by the currency phenomenon.
Unlike most people who believe that crypto infrastructure is oversaturated, Maelstrom’s main investment portfolio is still targeting infrastructure companies. Both Hayes and Akshat believe that infrastructure makes sense during this time period of this cycle, “Everyone Everyone is looking forward to user scale, but the market does not yet have enough infrastructure to support such a large user scale.”
The following is the original text of the interview:
BlockBeats: How did you and Arthur Hayes meet?
Ax:I started buying Bitcoin in 2013, around the time Arthur was starting BitMEX. By 2019, BitMEX had become the largest cryptocurrency trading platform in the world in terms of annual trading volume (in nominal US dollars), and I decided to leave the traditional financial industry and devote myself fully to the Crypto field. I was living in Chicago at the time and working for a mid-sized private equity firm.
Maelstorm event scene, with Akshat in the middle; Source: X
I remember that I accidentally saw a job posting for “BitMEX Ventures Investment Assistant”. The requirement to apply for this position was “Hong Kong applicants only.” Despite this, I submitted the application and successfully passed the interview, which is how I met Arthur for the first time. When I joined BitMEX, I initially worked under Arthur for a few levels and worked my way up, eventually becoming the company’s head of corporate development and M&A.
BlockBeats: Why did you choose to start this family fund with Arthur Hayes from BitMEX?
Ax:In the summer of 2022, I discussed the future development direction of BitMEX Ventures with Arthur and proposed to him a concept called the “Centennial Investment Portfolio.” I envision creating an investment fund that leverages Arthur’s unique advantage as one of the world’s youngest billionaires – time – to invest in future technologies and scarce assets, including Water Rights and cryptocurrencies. He was interested in the idea but suggested that we start smaller and focus on what we do best – cryptocurrencies.
Why does Maelstrom perform better than VC?
BlockBeats: How much money does Maelstrom manage now? What are the main responsibilities of an investment manager?
Ax:We do not publicly disclose assets under management (AUM), but it is not difficult to estimate a rough number based on our publicly available portfolio. I am responsible for developing investment strategies, executing trades, and managing Maelstrom’s venture capital portfolio. In 2022, the team is just me and Arthur. Today, I lead a full-time team of 6 traders, investors, and researchers, and expect to expand the team further during the next bear market.
BlockBeats: How do family funds in the Crypto field operate differently from VCs?
Ax:As one of the most influential builders in the crypto space, Maelstrom is able to provide its portfolio companies with hands-on operational support that other investors are difficult to provide. Many funds have outperformed their investment decisions, but few are led by someone who has successfully built a profitable unicorn in the crypto space.
In contrast, VCs typically have capital deployment obligations, so they are more likely to lower their investment standards to ensure funds are brought to market. This is why they often perform less well than family offices.
In addition, venture capital funds charge a 2% management fee to their LPs, so they have an incentive to continuously raise larger funds to maximize management fee income. Family offices do not have such incentives and are therefore able to focus more on finding high-quality investment opportunities, conducting in-depth due diligence, negotiating better investment terms, and providing substantial assistance to portfolio companies.
BlockBeats: How much influence does Arthur Hayes personally and his ideas have on your investment decisions?
Ax:Our investment team operates independently and Arthur is the final investment decision-maker, responsible for approving or disapproving each investment. His macro theory is one of the important references for us to formulate investment strategies. Arthur is more involved in portfolio management. Once we make an investment in a company, Arthur becomes a champion and his influence is felt throughout almost the entire portfolio.
The combination of CeFi and DeFi has great advantages, indirectly reaping the meme currency dividends.
BlockBeats: Judging from Maelstrom’s investment portfolio, your investment in the DeFi field is particularly prominent. What is the logic behind this?
Ax:CeFi has always been regarded as a bridge from traditional finance to DeFi. In the long term, we believe that capital formation and value capture will gradually shift to a permissionless decentralized system. However, in the short term, the combination of CeFi and DeFi can bring out the advantages of both parties. For example, Ethena is a classic case.
BlockBeats: Ethena is a project that Arthur is particularly optimistic about, but it has recently been questioned by the community because the currency price has not performed as expected. What do you think is the biggest problem Ethena has right now? What can or should the team and community do to turn things around?
Ax:All value investors understand that less than 6 months is not enough time to evaluate any serious investment, whether in cryptocurrency or otherwise. Although this does not constitute investment advice and everyone still needs to do their own research, overall, investment in profit protocols like Ethena that focus on practical applications is more like a long-term layout in the venture capital stage than a get-rich-quick plan.
Based on on-chain and off-chain data, Ethena has been extremely successful in finding initial product-market fit and has become one of the fastest-growing decentralized financial products in history. Since its launch at the beginning of this year, its number of users, TVL and partners have continued to grow, and the product mechanism has worked as expected under different scenarios (such as the market correction this summer).
The team is focused on building long-term value. Recently, Ethena announced a partnership with traditional financial giant BlackRock to launch a new UStb product that will be used in conjunction with the existing USDe. Ethena will become the only issuer that relies 100% on BlackRock’s BUIDL support and expands collateral options through this stablecoin, allowing CEX partners to choose to list USDe, UStb, or both at the same time. This move will have Help drive long-term value realization.
BlockBeats: Arthur often promotes some meme coins on Would Maelstrom consider investing in meme projects?
Ax:We view meme coins as a cultural phenomenon and will never look down upon anything that brings attention, engineers, and resources to the crypto space. However, Maelstrom, a venture capital fund focused on building infrastructure for a permissionless future, is not directly involved in meme coin trading. Instead, we indirectly capture the value of the meme coin phenomenon by investing in the infrastructure that supports the creation and dissemination of meme coins. Arthur is personally keen on trading meme coins. If you want to know his views on specific meme coins, you can follow his X account.
BlockBeats: The market is now very resistant to the concept of “VC coins”. In Maelstrom’s view, what is the problem with “VC coins”?
Ax:The incentives for VC funds encourage them to keep raising more money because they make money in two ways: a 2% management fee and a 20% share of performance. The performance of most VC funds is even worse than a simple passive investment strategy, so the 2% management fee has become one of the most “guaranteed” sources of income for VC fund managers. This makes their main goal to raise as large a fund as possible, even if there are no suitable capital deployment opportunities.
In the Crypto field, VC funds usually repeat similar operating patterns:
1) Rely on the successful experience of founders, industry leaders or investors in small-scale investments to raise VC funds;
2) Invest funds in early-stage projects, even if high-quality investment opportunities are limited;
3) Push up valuations in each round of financing and promote tokens to be listed on CEXs with high valuations;
4) Raise a new round of funding as quickly as possible and capitalize on unfulfilled track records. While the fund has performed well on paper, this has been largely due to CEXs like Binance listing key projects at valuations of 30x to 50x while the tokens are not yet fully liquid. Once circulated, token prices often drop by 50%-75% or more.
Ultimately, it is retail investors and limited partners in VC funds who bear the losses. This is one of the reasons why I prefer the family office model, as the incentives of the family office are fully aligned with the interests of the shareholder (in Maelstrom’s case, Arthur).
BlockBeats: Recently, more and more people in the industry have begun to discuss fundamentals such as project profitability and sustainable operating capabilities. Do you agree with this new development idea in the industry? In your opinion, has the crypto industry reached a stage where it is necessary to explore profit models? Will Maelstrom’s investment strategy and thinking change as a result?
Ax:Investing in early-stage crypto projects is essentially the same as investing in early-stage startups. Whether it’s your uncle’s laundry, a friend’s consumer app, or a VC-backed technology services business, you must conduct comprehensive due diligence before deciding whether to invest in a project. Investigate and evaluate the company’s founding team, products, roadmap, business model/revenue model, legal strategy, operating status, competitive landscape, token value accumulation mechanism, token economics and other factors.
Will there still be a bull market?
BlockBeats: The Federal Reserve has recently begun a cycle of interest rate cuts. Do you think this is a key catalyst for a new crypto bull market? What impact will the recent situation in the Middle East have on the encryption industry?
Ax:My personal view is that we may face two risks over the next few months that could lead to higher inflation in the short to medium term:
1. Regulators return to loose monetary policy;
2. The supply side may be disrupted (such as the intensification of the war in the Middle East and affecting the oil supply chain, and the strike of U.S. port workers).
If U.S. economic growth remains strong, regulators have easy tools to combat rising inflation. However, if the U.S. economy slows, the Fed may be faced with the dilemma of tightening policy to control inflation or easing policy to stimulate economic growth. In this case, more speculative crypto-assets (such as meme coins and early-stage projects) may underperform digital gold (such as Bitcoin) and those mature crypto products with actual protocol revenue and cash flow.
BlockBeats: Many people believe that cryptocurrencies do not seem ready for a new bull market based on industry innovation and fundamentals. Do you agree with this view? What do you think are the main drivers of the new cycle?
Ax:The growth process of the crypto industry is similar to that of the human genome, a child, or a developing country, gradually maturing through periods of rapid growth. I have been investing in cryptocurrencies since 2013 and have gone through many cycles:
The 2013/2014 cycle was the stage when Bitcoin found initial market fit as a store of value (before this, Bitcoin was still proving to core users that its decentralized P2P trading system was feasible);
·The 2017/2018 cycle focuses on the exploration of the potential of smart contracts after the initial success of Ethereum and other smart contract networks;
The 2021/2022 cycle is about smart contracts (especially Ethereum) finally finding their first real use cases (DeFi);
The 2023/2024 cycle is focused on expanding DeFi infrastructure (L1, L2, money markets, etc.) well beyond the initial test cases.
I believe that the next cycle will be driven by the following factors:
1. The combination of traditional finance (TradFi) and encryption technology;
2. Governments begin to regard encryption as a strategic priority;
3. Development of Decentralized IoT Infrastructure Network (DePIN).
There are currently many preliminary experiments underway in the DePIN field, and success is only a matter of time, which will attract more users, investors, engineers and new application scenarios into the Crypto field. As DePIN matures, encryption technology will be integrated into people’s lives in a wider range of areas than we can imagine.
In addition, there are many long-term catalytic factors, briefly listed below:
·The entry of traditional financial giants and the gradual recognition of cryptocurrencies in global investment portfolios;
·The world’s richest and most financially and crypto-literate generation (Gen Z and young people) are gradually entering the workplace;
·The first millennials interested in cryptocurrencies begin to inherit the wealth of previous generations;
·Long-term risks in the existing monetary system continue to accumulate and gradually intensify.