In 2023, Arthur Hayes and Akshat Vaidya, former head of corporate development at BitMEX, co-founded the investment institution Maelstrom Capital, with Vaidya as head of investment. Maelstrom was set up as Hayes' family office, with funds coming from Hayes, because there is no need to deal with LPs (after all, it is all Hayes' money), and there is no rush to allocate capital to earn management fees, so there is enough "patience". This also allows the market to see the different investment styles of family offices and VC institutions.

"We want to find projects that are really high-quality. This is not a game of 'spray and pray' (referring to wide-net investment, and then praying that a project will succeed), because we have no external LPs (after all, it is all our own money, so we have to be cautious)", said Hayes. At this moment when the market is maturing but there is still no clear way forward, BlockBeats had the honor of interviewing Akshat Vaidya, co-founder of Maelstrom, to discuss with him the development of family offices in the crypto field and their understanding of the market.

During the interview, BlockBeats asked Maelstrom whether he would participate in the current hot market trend to buy meme coins. Akshat replied that they did not directly participate in meme coin transactions, but indirectly obtained the value brought by the meme coin phenomenon by investing in infrastructure that supports the creation and dissemination of meme coins.

Unlike most people who think that crypto infrastructure is too saturated, Maelstrom's main investment portfolio is still aimed at infrastructure companies. Hayes and Akshat both believe that infrastructure makes sense during this period of the cycle. "Everyone is looking forward to user scale, but the market does not have enough infrastructure to support such a large user scale."

The following is the original interview:

BlockBeats: How did you meet Arthur Hayes?

Akshat:I started buying Bitcoin in 2013, when Arthur was starting BitMEX. By 2019, BitMEX had become the world's largest cryptocurrency exchange by annual volume (in nominal dollars), and I decided to leave the traditional financial industry and focus on Crypto. At the time, I was living in Chicago and working for a mid-sized private equity firm.

Maelstorm event site, Akshat in the middle; Source: X

I remember that I came across a job posting for an "Investment Assistant at BitMEX Ventures" and the requirement to apply for the position was "Hong Kong applicants only". Despite this, I submitted an application and eventually successfully passed the interview, which is how I first met Arthur. After joining BitMEX, I initially worked under Arthur for several levels, and then gradually rose through the ranks to become the company's head of corporate development and mergers and acquisitions.

BlockBeats: Why did you choose to leave BitMEX and work with Arthur Hayes on this family fund?

Akshat:In the summer of 2022, I discussed the future direction of BitMEX Ventures with Arthur and proposed to him a concept called the "100-year portfolio". I envisioned creating 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 what we do best - cryptocurrencies.

Arthur Hayes' influence on Maelstrom's operations

BlockBeats: How much money does Maelstrom manage now? What does the investment director mainly do?

Akshat:We do not publicly disclose our assets under management (AUM), but it is not difficult to estimate a rough number based on our public portfolio. I am responsible for proposing investment strategies, executing trades, and managing Maelstrom's venture capital portfolio. In 2022, the team consisted of only Arthur and I. Now, I lead a full-time team of 6 traders, investors, and researchers, and expect to further expand the team in the next bear market.

BlockBeats: Family funds in the Crypto field, how do they operate differently from VCs?

Akshat: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 can hardly provide. Many funds have performed well in investment decisions, but almost none of them are led by people who have successfully built profitable unicorns in the crypto space.

In contrast, VCs usually have an obligation to deploy capital, so they are more likely to lower their investment standards to ensure that funds can be put into the market. This is also the reason why they usually perform worse than family offices.

In addition, venture capital funds charge their LPs a 2% management fee, so they have an incentive to continuously raise larger funds to maximize management fee income. Family offices do not have this incentive mechanism, so they can focus more on finding high-quality investment opportunities, conducting in-depth due diligence, negotiating better investment terms, and providing substantial help to portfolio companies.

BlockBeats: How much influence does Arthur Hayes personally and his ideas have on your investment decisions?

Akshat:Our investment team operates independently, and Arthur is the final investment decision maker, responsible for approving or vetoing 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 invest in a company, Arthur will become a supporter of the company, and his influence runs almost throughout the entire portfolio.

The combination of CeFi and DeFi has great advantages, and indirectly eats meme coin dividends

BlockBeats: Judging from Maelstrom's investment portfolio, your investment in the DeFi field is particularly prominent. What is the logic behind this?

Akshat:CeFi has always been seen as a bridge from traditional finance to DeFi. In the long run, we believe that capital formation and value capture will gradually shift to a decentralized system without permission. However, in the short term, the combination of CeFi and DeFi can bring out the advantages of both sides. For example, Ethena is a typical case.

BlockBeats: Ethena is a project that Arthur is particularly optimistic about, but it has recently been questioned by the community because the price of the currency has not performed as expected. What do you think is the biggest problem Ethena is facing now? What can or should the team and 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 cryptocurrency space or other fields. While this does not constitute investment advice and everyone still needs to do their own research, in general, profitable protocol investments like Ethena that focus on practical applications are more like long-term layouts in the venture capital stage rather than quick-rich schemes.

According to on-chain and off-chain data, Ethena has been very successful in finding early 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 also worked as expected in 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, which will be used in conjunction with the existing USDe. Ethena will be the only issuer 100% backed by BlackRock’s BUIDL, and will expand collateral options with this stablecoin, giving CEX partners the choice of listing USDe, UStb, or both, which will help drive long-term value.

BlockBeats: Arthur often promotes some meme coins on X, and at the same time, more and more meme trading tools have made meme trading gradually become the main crypto active market in the Chinese community. What do you think are the main development trends of meme coins? Would Maelstrom consider investing in meme projects?

Akshat:We view meme coins as a cultural phenomenon and will never underestimate anything that can bring attention, engineers, and resources to the Crypto space. However, as a venture capital fund focused on building infrastructure for a permissionless future, Maelstrom does not directly participate in meme coin trading. On the contrary, we indirectly obtain the value brought by the meme coin phenomenon by investing in the infrastructure that supports the creation and dissemination of meme coins. Arthur is personally keen on meme coin transactions. If you want to know his views on specific meme coins, you can follow his X account.

BlockBeats: The market now has a strong resistance to the concept of "VC coin". In Maelstrom's view, what is the problem with "VC coin"?

Akshat:VC funds are motivated by incentives to raise more funds because they earn money in two ways: 2% management fees and 20% performance share. Most VC funds perform worse than even simple passive investment strategies, so the 2% management fee has become one of the most "secure" 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 space, VC funds often repeat similar operating patterns:

1) Raise VC funds based on the success of founders, industry leaders or investors in small-scale investments;

2) Invest funds in early-stage projects, even if quality investment opportunities are limited;

3) Push up valuations in each round of financing and push tokens to be listed on CEXs with high valuations;

4) Raise a new round of funds as soon as possible, using unfulfilled track records for fundraising. Although the funds performed well on paper, this was mainly due to CEXs like Binance listing key projects at 30x to 50x valuations, and these tokens were not yet fully liquid. Once circulated, token prices tend to fall by 50%-75% or even more.

Ultimately, it is the retail investors and VC fund limited partners who bear the losses. This is one of the reasons why I prefer the family office model, because the incentive mechanism of the family office is completely aligned with the interests of shareholders (Arthur in Maelstrom's case).

BlockBeats: Recently, more and more people in the industry have begun to discuss fundamentals such as profitability and sustainable operation of projects. Do you agree with this new development of the industry? In your opinion, has the crypto industry developed to the stage where it must explore a profit model? Will Maelstrom's investment strategy and thinking change as a result?

Akshat:Investing in early-stage crypto projects is essentially no different from investing in early-stage startups. Whether it is your uncle's laundry, your friend's consumer application, or a VC-backed technology service company, before deciding whether to invest in a project, you must conduct a comprehensive due diligence to evaluate the company's founding team, products, roadmap, business model/revenue model, legal strategy, operating conditions, competitive landscape, token value accumulation mechanism, and token economics.

Will there be another bull market?

BlockBeats: The Fed recently started a rate cut cycle. Do you think this is a key catalyst for a new round of crypto bull market? What impact will the recent situation in the Middle East have on the crypto industry?

Akshat: Personally, I think we may face two risks in the coming months that may lead to rising inflation in the short to medium term:

1. Regulators return to loose monetary policy;

2. Possible supply-side disruptions (such as the intensification of the Middle East war and affecting the oil supply chain, and the strike of US port workers).

If US economic growth remains strong, regulators have easy tools to deal with rising inflation. However, if the US economy slows down, the Fed may be caught in a dilemma, that is, 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 perform worse than digital gold (such as Bitcoin) and mature crypto products with actual protocol revenue and cash flow.

BlockBeats: Many people believe that from the perspective of industry innovation and fundamentals, cryptocurrencies do not seem to be ready for a new round of bull market. Do you agree with this view? What do you think is the main driving force of the new cycle?

Akshat: The growth process of the crypto industry is similar to the human genome, a child or a developing country, which gradually matures through phased rapid growth. I have been investing in cryptocurrencies since 2013 and have experienced multiple cycles: · The 2013/2014 cycle was about Bitcoin finding initial market fit as a store of value (before that, Bitcoin was still proving to its core users that its decentralized P2P trading system was viable); · The 2017/2018 cycle focused on exploring the potential of smart contracts after the initial success of Ethereum and other smart contract networks; · The 2021/2022 cycle was about smart contracts (especially Ethereum) finally finding their first real application scenario (DeFi);

The 2023/2024 cycle focused on expanding DeFi infrastructure (L1, L2, money markets, etc.), far 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 crypto technology;

2. Governments begin to regard crypto as a strategic priority;

3. The development of decentralized IoT infrastructure network (DePIN).

There are 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 to the Crypto field. As DePIN matures, crypto technology will be integrated into people's lives in a wider range of fields and in ways beyond our imagination.

In addition, there are many long-term catalysts, which are briefly listed as follows:

· 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 (Generation Z and young people) gradually enters the workplace;

· The first generation of millennials interested in cryptocurrencies begins to inherit the wealth of the previous generation;

· The long-term risks in the existing monetary system continue to accumulate and gradually intensify.

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