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Arthur Hayes and Akshat Vaidya are looking to beat bitcoin and ether’s returns, but they are going to take their time doing it.
Hayes, the former CEO of crypto exchange BitMEX, and Vaidya, BitMEX’s former head of corporate development, founded Maelstrom, where Vaidya serves as head of investments. In an interview with CoinDesk, Hayes and Vaidya said that Maelstrom is currently targeting infrastructure companies “as that’s what makes sense in this part of the cycle”.
"Nothing scales like consumer, but we're not quite at the phase where there's enough infrastructure to support that,” Vaidya said.
Maelstrom is set up as Hayes' family office, using a pool of his crypto and fiat money. Because there are no liquidity providers to answer to – as it's Hayes’ money – there’s no rush to deploy capital to earn management fees so the firm can be “patient.”
“We want to identify projects that are actually quality,” Hayes said. “It’s not a game of spray-and-pray because we don’t have outside LPs.”
Infrastructure deals have “strong technological moats that are addressing a large market, and it's simple to understand business: It's 'P' multiplied by market size,” explains Vaidya.
Good firms are founded in the bear market
Compound, Aave, and Uniswap were all founded in 2017, but they didn’t appear on anyone’s radar until 2019 and weren’t mainstream until the decentralized finance (DeFi) summer of 2020.
“At the time, no one cared about them due to the negativity around [initial coin offerings] and the massive bear market,” Hayes said. “This led to a surge of projects claiming to be the next Uniswap, Compound,or Aave, but many were based on something less substantial. Investors were willing to put money into these projects, knowing they could exit in a few months after getting their tokens,” Hayes added.
Hayes thinks the turning point for the projects in which he’s investing now will likely come sometime around 2024 when the market starts to question whether these projects have fulfilled their promises, built their products, acquired clients, and demonstrated that their technology works.
And with that comes clone projects and their "me too" investors, just like what happened during the COVID-19 bull market of 2020-2021, when clones of Uniswap, Compound and Aave became flush with capital.
“In this part of the cycle, it's important to make money but also to have done the work during the bear market to identify which companies are genuinely valuable and which are just imitations,” Hayes said.