Reflecting on Five Years of DeFiance Capital

Arthur0x kicks off by marking the 5-year milestone of DeFiance Capital, a journey that hasn’t been all smooth sailing. The recent collapse of a well-known liquid fund serves as a wake-up call, highlighting the tough realities of the crypto investment landscape. Instead of pointing fingers, Arthur uses this moment to reflect on his own experiences and share actionable takeaways. This humility sets the tone for a thoughtful discussion about improving the industry.

The thread references insights from Ray_L1D and cmsholdings, but Arthur zooms in on four key areas where crypto funds can level up. Whether you’re a blockchain newbie or a seasoned investor, these points offer a roadmap to navigate this wild market.

1. Alignment & Skin in the Game: Building Trust with Investors

One of the biggest challenges in crypto funds is ensuring that the people managing the money (General Partners or GPs) are on the same page as the investors (Limited Partners or LPs). Arthur emphasizes that having "skin in the game"—where GPs invest their own money—creates trust. He suggests that GPs should commit at least 20% of their capital for smaller funds (or 10% for larger ones), ideally making it a big chunk of their personal wealth.

For example, Arthur reveals he’s the largest investor in DeFiance Fund I and a top investor in their current liquid fund. This means if things go south, he’s the one taking the biggest hit. However, he warns against GPs owning too much (over 60%), as it could turn the fund into a personal piggy bank, ignoring outside investors. It’s all about balance—keeping everyone’s interests aligned.

2. Professional Operations & Risk Management: Staying Secure in a Volatile World

Running a crypto fund isn’t just about picking winners; it’s about keeping everything running smoothly. Arthur points out that many funds, especially those led by crypto natives without traditional finance experience, struggle with operations and risk management. A single hack or sloppy collateral management on an exchange can wipe out a fund overnight.

Since there’s no one-size-fits-all toolkit for crypto fund operations, managers often have to piece together custom solutions. This DIY approach can be a weak spot, but it’s also an opportunity to innovate. Strong risk management—think secure storage and real-time monitoring—can make or break a fund’s reputation.

3. Professionalism & Integrity: Shining in a Crisis

Crypto markets are notorious for their rollercoaster rides, and every long-lasting fund has faced a crisis or two. Arthur, who’s weathered his share of storms, stresses the importance of transparency during tough times. Investors crave honest communication, even if it’s not the full picture.

Hiding behind lawyers or dodging questions, he warns, is a fast track to losing trust. As the CEO, the buck stops with you—not your legal team. This advice resonates beyond crypto, reminding us that integrity is key when the going gets tough.

4. A 5km Run: Sustainable Outperformance Over Time

Unlike venture capital, where you get 5-10 years to prove your worth, liquid crypto funds are judged on a much shorter leash—sometimes monthly or quarterly. Arthur likens this to a "5km run," a middle ground between a sprint and a marathon. The goal? Consistent outperformance, not just one lucky trade.

This fast-paced environment forces fund managers to constantly evaluate their strategies. Are they still effective? Do they still have an edge? Arthur asks himself these questions regularly to keep DeFiance Capital ahead of the curve. It’s a mindset every crypto practitioner can adopt to stay relevant.

The Takeaway: A Call for Industry Improvement

The accompanying image—a glowing structure with roots anchored in a stormy sea—perfectly captures the resilience needed in crypto. Arthur wraps up with a casual “Hasta otra, amigo,” leaving us with food for thought. His thread isn’t just a reflection; it’s a challenge to the industry to do better—better alignment, better operations, better communication.

For blockchain practitioners, this is a treasure trove of wisdom. Whether you’re managing a fund or just investing, these lessons can guide you through the chaos. Head over to meme-insider.com for more deep dives into the crypto world, and let’s keep the conversation going in the comments below! What do you think about Arthur’s insights? Drop your thoughts!