In 2023, Arthur Hayes and Akshat Vaidya, the former Head of Corporate Development at BitMEX, co-founded the investment firm Maelstrom Capital, with Vaidya serving as the Investment Manager. Maelstrom is set up as Hayes' family office, with funding coming from Hayes himself. Since there are no external LPs (as it's all Hayes' money), Maelstrom has the "patience" to deploy capital without the pressure of earning management fees. This allows the market to see the different investment styles between family offices and VC firms.
As Hayes says:
"We want to find truly high-quality projects, not a 'spray and pray' game (referring to the broad-based investment approach and then hoping for successful projects), because we don't have external LPs (since it's our own money, so we have to be careful)."
In the current market, which is maturing but still lacks a clear path forward, BlockTempo had the opportunity to interview Akshat Vaidya, the co-founder of Maelstrom, to discuss the development of the family office in the crypto space and its market perceptions.
During the interview, BlockTempo asked whether Maelstrom would participate in the current hot market trends by investing in MEME coins. Akshat responded that they do not directly engage in MEME coin trading, but rather invest in the infrastructure that supports the creation and distribution of MEME coins, indirectly capturing the value of the MEME coin phenomenon.
Contrary to the common belief that the crypto infrastructure is already oversaturated, Maelstrom's investment portfolio still primarily targets infrastructure companies. Both Hayes and Akshat believe that infrastructure is meaningful at this stage of the current cycle, "Everyone is expecting user-scale, but the market still lacks enough infrastructure to support such a large user scale."
The following is the original interview:
BlockTempo: How did you and Arthur Hayes get to know each other?
Akshat: I started buying Bitcoin in 2013, during the time when Arthur was in the process of building BitMEX. By 2019, BitMEX had become the world's largest crypto trading platform in terms of annual trading volume (in notional USD), and I decided to leave the traditional finance industry to fully immerse myself in the Crypto space. At the time, I was living in Chicago, working at a mid-sized private equity firm.
I remember I happened to see a job posting for a "BitMEX Ventures Investment Associate" position, which was only open to applicants in Hong Kong. Despite this, I still submitted my application and ultimately passed the interview, which was how I first met Arthur. After joining BitMEX, I initially worked under Arthur at several levels, gradually advancing to become the company's Head of Corporate Development and M&A.
BlockTempo: Why did you choose to leave BitMEX and start this family fund with Arthur Hayes?
Akshat: In the summer of 2022, I discussed the future direction of BitMEX Ventures with Arthur and proposed a concept called the "Century Portfolio". I envisioned building an investment fund that would leverage 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 on a smaller scale and focus on the area we are most proficient in - cryptocurrencies.
The Impact of Arthur Hayes on Maelstrom Operations
BlockTempo: How much capital does Maelstrom currently manage? What are the main responsibilities of the Investment Manager?
Akshat: We do not publicly disclose our Assets Under Management (AUM), but based on our publicly disclosed investment portfolio, it's not difficult to estimate a rough figure. I am responsible for proposing investment strategies, executing trades, and managing Maelstrom's risk investment portfolio. In 2022, the team was just me and Arthur. Now, I lead a full-time team of 6 traders, investors, and researchers, and we plan to further expand the team during the next bear market.
BlockTempo: How does the operation of a crypto family office differ from that of a VC firm?
Akshat: As one of the most influential builders in the Crypto space, Maelstrom is able to provide its portfolio companies with practical operational support that other investors find difficult to offer. Many funds excel at investment decision-making, but hardly any are led by someone who has successfully built a profitable unicorn in the Crypto industry.
In contrast, VCs typically have capital deployment obligations, so they are more likely to lower their investment standards to ensure that the capital can be deployed. This is also why they often underperform family offices.
Additionally, venture capital funds charge a 2% management fee to their LPs, so they have an incentive to constantly raise larger funds to maximize their management fee income. Family offices, on the other hand, do not have this incentive mechanism, allowing them to focus more on finding high-quality investment opportunities, conducting in-depth due diligence, negotiating better investment terms, and providing substantive support to their portfolio companies.
BlockTempo: How much influence do Arthur Hayes' personal views and ideas have on your investment decisions?
Akshat: Our investment team operates independently, with Arthur being the final decision-maker, responsible for approving or rejecting each investment. His macroeconomic theories are an important reference for our investment strategy formulation. In terms of portfolio management, Arthur's involvement is more extensive. Once we invest in a company, Arthur becomes a supporter of the company, and his influence permeates the entire investment portfolio.
The Synergy between CeFi and DeFi is Significant, Indirectly Benefiting from MEME Coin Dividends
BlockTempo: Looking at Maelstrom's investment portfolio, your investments in the DeFi space are particularly prominent. What is the logic behind this?
Akshat: CeFi has always been seen as a bridge from traditional finance to DeFi, and in the long run, we believe that capital formation and value capture will gradually shift towards permissionless decentralized systems. However, in the short term, the combination of CeFi and DeFi can leverage the advantages of both. Ethena is a typical case in point.
BlockBeats: Ethena is a project that Arthur is particularly optimistic about, but it has recently been questioned by the community due to its underperforming token price. In your opinion, what is the biggest problem Ethena is currently facing? What can the team and the community do to turn the situation around?
Akshat: All value investors understand that less than 6 months is not enough time to evaluate any serious investment, whether in the crypto space or elsewhere. While this does not constitute investment advice, and everyone still needs to do their own research, overall, investments in profit-generating protocols like Ethena are more like long-term plays in the venture capital stage, rather than get-rich-quick schemes.
Based on on-chain and off-chain data, Ethena has been very successful in finding initial product-market fit, and has become one of the fastest growing decentralized finance products in history. Since its launch earlier this year, its user numbers, TVL, and partnerships have continued to grow, and the product mechanics have performed as expected even in different market conditions (such as the market pullback this summer).
The team is focused on building long-term value, and recently, Ethena announced a collaboration with traditional finance giant BlackRock to launch a new UStb product, to be used in conjunction with the existing USDe. Ethena will be the sole issuer 100% backed by BlackRock's BUIDL support, and the expanded stablecoin collateral options will allow CEX partners to list USDe, UStb, or both, helping to drive long-term value realization.
Further reading: Ethena to Launch New "Stablecoin UStb" Earning BlackRock BUIDL Fund Yields, ENA Jumps 20%
BlockBeats: Arthur often promotes some meme coins on X, and more and more meme trading tools are making meme trading the main crypto active market in the Chinese community. What do you think are the main development trends of meme coins? Will Maelstrom consider investing in meme projects?
Akshat: We view meme coins as a cultural phenomenon and will not dismiss anything that brings attention to the Crypto space and attracts engineers and resources. However, as a venture capital fund focused on building infrastructure for the permissionless future, Maelstrom does not directly participate in meme coin trading. Instead, we indirectly capture the value of the meme coin phenomenon by investing in the infrastructure that supports meme coin creation and distribution. Arthur himself is enthusiastic about meme coin trading, and if you want to understand his specific views on certain meme coins, you can follow his X account.
BlockBeats: The market now has a strong aversion to the concept of "VC coins". In Maelstrom's view, what are the problems with "VC coins"?
Akshat: The incentive structure of VC funds drives them to constantly raise more capital, as they profit in two ways: a 2% management fee and a 20% performance fee. In fact, the performance of most VC funds is even worse than simple passive investment strategies, so the 2% management fee becomes one of the most "guaranteed" income sources for VC fund managers. This makes their primary goal to raise ever-larger funds, even if there are not enough suitable capital deployment opportunities.
In the Crypto space, VC funds often repeat a similar playbook:
- Leverage the success of founders, industry leaders, or investors in small-scale investments to raise VC funds;
- Deploy capital into early-stage projects, even when quality investment opportunities are limited;
- Ratchet up valuations in each funding round and push for token listings on high-valuation CEXes;
- Quickly raise new rounds of funding, using their unrealized performance track record for fundraising. While the fund's performance looks impressive on paper, this is largely due to key projects being listed on CEXes like Binance at 30x to 50x valuations, before the tokens have fully circulated. Once they do, the token prices often drop 50%-75% or more.
Ultimately, the losses are borne by retail investors and the limited partners of VC funds. This is one of the reasons why I am more inclined towards the family office model, as the incentive structure of family offices is fully aligned with shareholder interests (in Maelstrom's case, Arthur).
Further reading: The Market Needs a "Shitcoin Season" to Save the Trapped Crypto VCs
BlockBeats: Recently, more and more people in the industry have started discussing the profitability and sustainability of projects. Do you agree with this new development in the industry? In your view, has the crypto industry reached the stage where it needs to explore profitability models? Will Maelstrom's investment strategy and thinking change as a result?
Akshat: Investing in early crypto projects is no different in essence from investing in early startups, whether it's your uncle's laundromat, a friend's consumer app, or a VC-backed tech services company. Before deciding to invest in a project, a comprehensive due diligence must be conducted to assess factors such as the founding team, product, roadmap, business model/revenue model, legal strategy, operations, competitive landscape, token value accrual mechanisms, and token economics.
Will there be another bull market?
BlockBeats: The US Federal Reserve has recently begun a rate-cutting cycle. Do you think this is a key catalyst for a new crypto bull market? How will the recent situation in the Middle East affect the crypto industry?
Akshat: Personally, I believe we may face two risks in the coming months that could lead to short-term to medium-term inflationary pressures:
- Regulatory authorities are returning to a more accommodative monetary policy;
- The supply side may be disrupted (such as the escalation of the Middle East war affecting the oil supply chain, and the strike of US port workers).
If the US economy maintains strong growth, regulators will have a simple tool to address rising inflation. However, if the US economy slows down, the Federal Reserve may find itself in a dilemma, either 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 projects) may not perform as well as digital gold (such as Bitcoin) and more mature crypto products with actual protocol revenue and cash flow.
Further reading: Another culprit behind Bitcoin's plunge: 45,000 US East Coast port workers go on strike! JPMorgan: $5 billion in daily losses
BlockBeats: Many believe that from the perspective of industry innovation and fundamentals, cryptocurrencies do not seem to be ready for a new bull market yet. Do you agree with this view? What do you think will be the main drivers of the new cycle?
Akshat: The growth of the crypto industry is similar to the human genome, a child, or a developing country, gradually maturing through stages of rapid growth. I have been investing in cryptocurrencies since 2013, experiencing multiple cycles:
- The 2013/2014 cycle was the stage where Bitcoin found its initial market fit as a store of value (before that, Bitcoin was still proving to its core users that its decentralized P2P transaction system was viable);
- The 2017/2018 cycle focused on the exploration of the potential of Ethereum and other smart contract networks after their initial success;
- The 2021/2022 cycle was about smart contracts (especially Ethereum) finally finding their first real application scenario (DeFi);
- And the 2023/2024 cycle will focus on expanding the DeFi infrastructure (L1, L2, money markets, etc.), far beyond the initial test cases.
I believe the next cycle will be driven by the following key factors:
- The convergence of traditional finance (TradFi) and crypto technology;
- Governments around the world starting to treat crypto as a strategic priority;
- The development of decentralized Internet of Things (DePIN) infrastructure networks.
There are many early experiments underway in the DePIN field, and success is just a matter of time, which will attract more users, investors, engineers, and new use cases into the crypto space. As DePIN matures, crypto technology will integrate into people's lives in ways we can't imagine across a wider range of domains.
Additionally, there are many long-term catalysts, simply listed as follows:
- The entry of traditional financial giants and the gradual acceptance of cryptocurrencies in global investment portfolios;
- The youngest and most financially and crypto-literate generation (Gen Z and young people) entering the workforce;
- The first generation of millennials interested in cryptocurrencies beginning to inherit the wealth of the previous generation;
- The accumulation and gradual exacerbation of long-term risks in the existing monetary system.
