Arthur Hayes and Adam Schlegel on Why Private Equity Is Crypto's Next Big Wave - Ep. 933 · Unchained summary

Key takeaways

Private equity is becoming an essential part of the crypto landscape, targeting profitable companies that have been overlooked by venture capital.
Many of the most promising crypto companies are located in Asia and Latin America, which need more attention from Western investors.
Maelstrom's due diligence process involves a deep dive into technology, financials, and management teams to ensure the viability of potential investments.
The conventional understanding of a four-year crypto cycle is evolving due to increased institutional involvement.
The competition in the stablecoin market is intensifying, and platforms need to innovate and ensure they provide value to maintain their user base.

Summary

The Dawn of Private Equity in Crypto

Arthur Hayes and Adam Schlegel emphasize the shift in crypto investment strategy towards private equity, highlighting the $250M fund by Maelstrom that targets profitable crypto companies generating $50M in revenue with 50% EBITDA margins. They argue that this is a necessary evolution in crypto, serving as cash buyers for founders looking to exit without long earnouts.

Geographical Focus: Overlooked Markets

A significant part of the discussion focuses on the undervaluation of crypto firms in Asia and Latin America. Hayes points out that many valuable crypto businesses are located in regions that Western venture capital has largely ignored, despite their potential profitability and growth.

Investment Strategy and Due Diligence Process

The conversation highlights Maelstrom's due diligence approach, explaining how they identify and vet potential investments in crypto companies. Schlegel shares insights into how they plan to leverage their networks, perform technology audits, and thoroughly analyze financials to ensure they back solid businesses.

Market Dynamics: The Four-Year Cycle is Changing

Hayes reflects on the historical cycles of crypto investment and suggests that the notion of a strict four-year cycle is outdated. They discuss how institutional adoption is altering market dynamics, presenting both challenges and opportunities for private equity in the crypto space.

Major Developments in Stablecoins and Trading Platforms

The episode explores the ongoing competition in the stablecoin market and the implications of trading platforms like Binance and Coinbase developing features in response to decentralized exchanges (DEXs). They delve into the ramifications this has for liquidity and how businesses like Tether, Circle, and new entrants like Ethena will fare.

Show notes

Crypto has spent years obsessing over tokens, airdrops, and speculation. But what about the unsexy businesses actually making money?

Arthur Hayes and Adam Schlegel join Laura Shin to talk about Maelstrom's $250M private equity fund targeting crypto's most profitable, yet overlooked, companies, $50M revenue businesses with 50% margins that VCs can't touch and exchanges won't pay cash for.

But while everyone frames this as just another fund, Hayes and Schlegel argue it's actually the missing piece in crypto's maturation: a cash buyer for founders who've done their time and want out without four-year earnouts.

Plus: Why Asian crypto companies with monster margins get ignored by Western capital.

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Guests:

Arthur Hayes, Co-Founder of BitMEX & CIO at Maelstrom

Adam Schlegel, Head of Private Equity at Maelstrom

Links:

Previous appearances on Unchained:

The Chopping Block: Arthur Hayes & Tom Lee; Hyperliquid vs Aster, DATs & ETH

Arthur Hayes and Hanson Birringer on Hyperliquid’s Success (And What Could Stop It)

Bloomberg: Arthur Hayes’ Family Office Seeks $250M for Buyout Fund

Coindesk: Arthur Hayes’ Maelstrom Seeks $250M Private Equity Fund to Acquire Crypto Firms: Bloomberg

Akshat’s tweet announcing the fund

Timestamps:

🎬 0:00 Intro

📰 1:08 Maelstrom’s $250M private equity fund to buy crypto firms

👤 1:42 Adam’s background and path from Morgan Stanley to Haveli to Maelstrom

💼 3:51 Why Maelstrom believes the next crypto boom is in private equity

📈 4:42 Arthur on how crypto investing evolved from beta → VC → PE

🌏 10:05 Geographic focus: Asia and LatAm’s overlooked crypto firms

🧭 11:49 How Maelstrom evaluates targets and performs due diligence

🛠️ 17:02 Inside Maelstrom’s $250M anchor fund and LP co-invest model

👀 26:01 The types of companies Maelstrom is targeting

⚙️ 30:16 Fund structure and Arthur’s role in Maelstrom PE

📊 36:05 “The four-year cycle is dead”: Arthur on today’s crypto market

💰 39:18 Investor requirements and $5M minimum commitment

🏦 42:09 Coinbase’s Echo acquisition and what it means for exchanges

⚔️ 47:59 The perps war, how DEXs are forcing CEXs toward zero-fee trading

💥 52:18 Binance, ADL liquidations, and leverage risk

🔮 56:27 Prediction markets: Polymarket vs Kalshi vs Limitless

💵 59:06 Stablecoins and rates, why Tether and Circle could lose to Ethena

📈 1:04:15 Who wins the next phase of crypto’s evolution

🔚 1:08:14 Closing thoughts

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Arthur Hayes and Adam Schlegel on Why Private Equity Is Crypto's Next Big Wave - Ep. 933