BFX’s “Crypto Market Wizards” series features in-depth interviews with seasoned DeFi traders and investors. The series explores their backgrounds, strategies, psychological approaches, risk management techniques, and other key factors that have shaped their success in the DeFi space.
The aim of these interviews is twofold: they are not only engaging but also serve as a learning tool for aspiring traders. They embody the spirit of collective growth and open knowledge exchange that is a hallmark of the DeFi community. This series is BFX’s contribution to this vibrant ecosystem.
Our latest interview is with Arthur, a notable figure in DeFi investment and the founder and CEO of DEFIANCE CAPITAL, a leading venture capital firm in the crypto world (note: DeFiance Capital is an investor in BFX). Enjoy the insights.
BFX: Arthur, can you share your journey and what you’re focusing on now?
Arthur: Sure, I’m Arthur, the mind behind Defiance Capital. We’re a crypto and web3-focused investment firm in Asia, primarily investing in liquid crypto assets.
BFX: How did your crypto journey start?
Arthur: My crypto path began in 2017 with Ethereum’s notable surge. I’ve been an investor since my youth, and the rise in crypto piqued my interest. By 2018, I was fully immersed in the sector. My broader investment journey started around 20, focusing initially on the stock market.
BFX: What led you to stocks at such an early age?
Arthur: My first stock investment was at 18, initially influenced by investment firm picks. By 20, I was deep into learning investment strategies and philosophies.
BFX: Any early experiences that shaped your investment path?
Arthur: Absolutely. My family’s history of financial management, or the lack thereof, and the traditional paths to wealth—corporate leadership or finance—steered me towards investing. Tech dominance wasn’t apparent then, making finance seem more lucrative.
BFX: Your first significant investment success?
Arthur: Alibaba around 2014-2015 was my first major win. I saw their potential when others were wary of Chinese tech firms. My investment tripled within a year.
BFX: Can you elaborate on your investment philosophy?
Arthur: It starts with defining your investment timeline. I focus on a six-month to two-year window. My approach is a concentrated portfolio of 5 to 15 deeply understood investments. Beyond a certain point, diversification doesn’t contribute much to alpha generation. I dive deep into sectors, seeking undervalued assets, with fundamental research backing my convictions.
BFX: How do you approach fundamental analysis in crypto?
Arthur: Crypto challenges traditional metrics. For instance, Bitcoin, to me, is an alternative store of value rather than a payment channel. I assess its relative value in the global store of value market. For productive assets like Ethereum, I focus on user engagement and the network’s potential to gain monetary premium. Metrics like TVL are also crucial.
BFX: Your take on “moneyness” in crypto?
Arthur: “Moneyness” refers to how much an asset functions as money. Fiat is fully money, while Bitcoin partially serves as both a transaction medium and an investment. The degree to which an asset fulfills the roles of money determines its “moneyness.”
BFX: Your strategy for choosing investment entry points?
Arthur: We’re fundamentally driven. It’s not just about price but valuation multiples. While intrinsic value matters, waiting for the perfect entry point isn’t always feasible if an asset checks all your boxes.
BFX: How do you gauge investment success?
Arthur: Constant re-evaluation is key. We reassess our investments every two weeks. If the fundamentals change or new information emerges, we adapt. It’s about refining the investment process through ongoing analysis.
BFX: Risk management in your firm?
Arthur: We set position limits and avoid excessive leverage. Our focus is more on investment than trading, so drawdown limits are less strict, but significant drawdowns prompt a reevaluation.
BFX: Advice for individual investors regarding leverage?
Arthur: Be cautious. In crypto, I don’t recommend portfolio-level leverage due to the volatility. Position-level leverage can be manageable, but be aware of counterparty risks.
BFX: Current VC investment landscape?
Arthur: VC funding is more cautious now. Investments are leaning towards top-tier projects, with a thorough due diligence process. The era of rapid fund closures has slowed down.
BFX: Your internal expected IRR?
Arthur: We aim to outperform Bitcoin and Ethereum over market cycles, focusing on liquid tokens for medium to long-term investment.
BFX: Why focus on liquid ventures?
Arthur: Liquid ventures offer better risk-adjusted returns and allow for ongoing investment reevaluation. Traditional VC locks your capital until an exit event, but liquid ventures offer more flexibility and adaptability.
BFX: Managing emotional toll during market downturns?
Arthur: Time and experience help in coping with volatility. Unexpected industry events are more challenging. I unwind with regular exercise and engaging activities like gaming.
BFX: Book recommendations and advice for newcomers?
Arthur: Stick to the classics in investment literature. For newcomers, do your homework before investing and think independently. Avoid blindly following others.
BFX: Thanks, Arthur, for your insights. Let’s keep building.
Enjoyed the article?
Subscribe for more and follow us on Twitter at @Blastfutures