Secrets to Making it in Crypto This Bull Market w/ Arthur0x

Oct 15, 2026

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Secrets to Making it in Crypto This Bull Market w/ Arthur0x

Explore the secrets to thriving in the current crypto bull market with Arthur0x. Learn from his journey through bear markets and fund management.

The cryptocurrency market is experiencing a resurgence, with certain assets demonstrating remarkable outperformance even amidst broader market downturns. Arthur Hayes, CEO and CIO of Defiance Capital, an investment firm specializing in high-conviction liquid crypto markets, shared his perspectives on the current market cycle, past challenges, and future outlook.

The Shifting Market Cycle

Hayes posits that the bear market has concluded, and a new cycle is underway, characterized by a bull market sentiment. He notes that the recent rally was largely unexpected, driven by factors beyond typical market fundamentals. The US Treasury Secretary's remarks, coupled with gold's performance, initially signaled a shift, but crypto's subsequent surge was particularly pronounced. This rally appears to be driven by "smart money," with assets like Zcash and Hyperliquid experiencing significant gains. This contrasts with previous retail-driven rallies, suggesting a more discerning market rewarding fundamentally sound projects.

Personal Journey Through Crypto Cycles

Hayes recounted his own experiences, including a challenging 2022, which he described as the "worst year of my life so far." He detailed significant drawdowns, including a 50-60% market-related loss, compounded by an additional 40% from the Three Arrows Capital (3AC) collapse, resulting in an approximate 90% net worth reduction.

He founded Defiance Capital in 2020, leveraging his early involvement and success in the Decentralized Finance (DeFi) sector during the 2020-2021 bull run. His early conviction in projects like Synthetix, despite significant price drops and market skepticism, highlights a core investment philosophy. He emphasized the importance of a persistent and capable founding team, alongside a sound sector thesis, as key factors in navigating bear markets.

The 2020-2021 bull market saw Defiance Capital grow from single-digit to double-digit millions, with one month in January 2021 yielding a 180% return for the fund. However, this period was also marked by FOMO (Fear Of Missing Out) and the rapid pace of market movements, making it difficult to fully process the gains.

The Crucible of 2022

The year 2022 presented a confluence of challenges. DeFi assets began underperforming in late 2021, with Layer 1 solutions taking the lead. Hayes detailed a $10 million investment in Luna in December 2021, which subsequently collapsed. This was followed by a personal NFT wallet hack resulting in over$ 1 million in losses and the collapse of Three Arrows Capital, a firm with which Defiance had a partnership for fund management. This partnership, though intended to leverage 3AC's hedge fund experience, led to significant complications during their bankruptcy proceedings. The subsequent FTX collapse, while not directly exposing Defiance significantly due to prior issues with 3AC, added to the industry's turmoil.

Despite these setbacks, Hayes relaunched the Defiance fund in March 2023, marking a new chapter. He estimates his personal net worth drawdown to be around 90%, with market-related losses at 50-60% and the 3AC situation contributing another 40%.

Resilience and Lessons Learned

Hayes chose not to quit, despite facing legal battles and what he described as an "uneven and unfair battle against liquidators and lawyers." He views bankruptcy proceedings in crypto as a potential "scam," citing the substantial fees paid to legal professionals. His decision to persist was rooted in a strong belief in the facts of his case and the principle that he had done nothing wrong. He also highlighted the importance of a team that perseveres and the value of learning critical lessons early in one's career. The experience honed his legal strategizing skills and understanding of navigating complex legal situations, albeit at a high "tuition fee."

Current Market Positioning and Convictions

Hayes believes the market is currently underpositioned, with many individuals and even former crypto OGs having moved assets to traditional finance or ETFs for perceived safety. He identifies Hyperliquid, Near, and Zcash as high-conviction holdings.

Hyperliquid: He acknowledges its high valuation but emphasizes its strong execution, community, innovation, and market share gains from centralized exchanges. The key question remains whether it can justify its valuation against traditional benchmarks like NASDAQ.
Near: Hayes views Near as an underrated but consistently executing Layer 1 project with a strong founder and a clear vision, particularly around AI integration. He notes the difficulty of building a Layer 1 ecosystem and praises Near's founder for maintaining focus and engagement throughout the bear market.
Zcash: He sees Zcash as a potential hedge for Bitcoin holders, particularly concerning quantum computing threats and Bitcoin's perceived limitations in scalability and privacy. The asset's outperformance is attributed to Bitcoin whales swapping into Zcash, driven by a belief in its privacy thesis and its continued listing on major exchanges, a risk for many privacy coins.

He also touched upon the intersection of crypto and AI, seeing crypto as a crucial technology for ensuring privacy and encryption in AI development, counterbalancing the potential for data exploitation by large AI labs.

Investment Philosophy and Strategy

Hayes advocates for asset selection over precise market timing, especially for mid-cap coins. He believes that while major assets like Bitcoin and Ethereum are seeing institutional inflows, crypto-native capital is rotating into promising mid-cap projects.

Regarding portfolio sizing, Defiance Capital typically holds 5-10 positions, with high-conviction bets ranging from 10-20%, potentially up to 30-40% in extreme cases. He cautions against over-concentration, as it can lead to being shaken out by negative news and hinder the ability to capitalize on new opportunities.

He views great traders as a combination of innate talent ("nature") and learned skill ("nurture"), estimating his own profile at 70% nature and 30% nurture, driven by curiosity and risk appetite.

For individuals aiming to grow capital, he suggests identifying 3-5 high-conviction projects, ideally in their early stages, and holding them for significant returns (3-5x). He notes that while 10x returns are possible, they are rarer and riskier, especially with established projects.

Final Thoughts

Hayes concludes by emphasizing the importance of conviction and belief in the crypto space. He suggests that the industry, despite its challenges and negative externalities, has a unique ability to reward believers. He advises individuals to determine their optimal allocation to crypto, stick to it, and focus on the long-term vision, believing that this approach, coupled with a strong belief in the underlying principles of decentralization and privacy, will ultimately lead to rewards.

Market Outlook: Bull or Bear?

The discussion begins by assessing the current market sentiment, with a consensus that the bear market has likely concluded. Despite some appearances, the prevailing view is that a new cycle is underway, driven by unexpected rallies and smart money activity rather than broad retail participation. Specific altcoins like Zcash and Hyperliquid are highlighted as outperformers, suggesting a shift towards fundamentally sounder projects.

The speaker believes the bear market has ended and a new cycle is starting, though it currently looks like a bear market to some.
The bare market is perceived to have ended around August of the current year.
The current rally is unexpected, with some catching the bottom in June/July.
Macroeconomic factors were concerning, with equity markets correcting and bond yields climbing.
Crypto rallied suddenly due to remarks from the US Treasury Secretary.
The rally is characterized by smart money consensus, with names like Zcash and Hyperliquid performing well.
This rally feels different from previous retail-driven ones.
Mid-cap coins are seen as winning in this cycle.

Arthur0x's Crypto Journey and Defiance Capital

Arthur0x recounts his entry into crypto in 2018 and the founding of Defiance Capital in 2020, a DeFi-focused fund. He details his early successes during DeFi Summer, leveraging his experience from the previous bear market. The rapid growth of the 2020-2021 bull cycle is described as a surreal, fast-paced period where the fund achieved significant gains, including a record 180% in a single month, while navigating the complexities of scaling operations.

Arthur entered the crypto space full-time in 2018.
Defiance Capital was founded in 2020, focusing on DeFi.
He had early success with DeFi protocols like Synthetix and Uniswap during DeFi Summer.
The fund capitalized on the limited number of experienced DeFi managers post-2018/2019 bear market.
Arthur describes the 2020-2021 cycle as a blur of rapid growth and 'matt scrambling'.
The fund experienced a 180% gain in January 2021, a record month.
He reflects on missing out on parabolic gains from other sectors like BSC chain.
The fund grew from eight figures to nine figures during the bull run.
Scaling the fund involved hiring, operations, and dealing with service providers.

Navigating the Trenches: The Synthetics Trade and Early Conviction

Arthur shares his experience with an early investment in Synthetix, highlighting his conviction in DeFi's long-term potential despite significant market volatility and project drawdowns. He explains how belief in the founding team and the fundamental innovation of DeFi allowed him to hold through extreme price drops, even when the market cap fell drastically. This period also solidified his commitment to the crypto industry.

Arthur was an early investor in Synthetix, present in its early Discord community.
He maintained conviction in DeFi as a zero-to-one innovation despite market downturns and scams.
The belief was that DeFi was building a parallel financial platform with 100x-1000x growth potential.
He bought Synthetix when its market cap was below $50 million, and it later dropped below$ 20 million.
At its worst, Synthetix was down 50% from his average cost.
Holding through extreme drawdowns requires belief in the founding team's persistence and the sector's direction.
The founder of Synthetix, Kain, remained active and provided material progress updates.
The decision to hold was also influenced by a lack of better options and deep immersion in the space.
Many who spend over a year in crypto find it hard to return to traditional jobs.

The Brutal Reality of 2022: Hacks, Collapses, and Resilience

Arthur details the catastrophic events of 2022, which he labels the worst year of his life. This period included a personal NFT hack resulting in over $1 million in losses, the collapse of Luna (in which his fund had invested $10 million), and the subsequent implosion of Three Arrows Capital (3AC). The reliance on 3AC for fund management exacerbated the impact, leading to legal battles and the inability to continue trading from that fund. The FTX collapse further compounded the industry's turmoil.

2022 is described as the worst year of Arthur's life.
DeFi coins began underperforming in the second half of 2021, with Layer 1s like Solana and Avalanche leading.
In 2022, projects raised 'insane amounts of money', including Luna.
Defiance Capital invested $10 million into Luna in December 2021.
The narrative around Luna was its potential to flip stablecoins like Tether.
Arthur was personally hacked, losing over $1 million in NFTs in March 2022.
Luna collapsed in May 2022.
Three Arrows Capital (3AC) collapsed a month later, significantly impacting Defiance.
Defiance used 3AC as a platform to manage their fund due to limited clean options in Asia.
The partnership structure with 3AC was not ideal, highlighting a common crypto tendency to overlook details.
3AC's collapse halted trading and investment from that fund, leading to liquidators and lawsuits.
FTX collapsed five months after 3AC, though Arthur was less exposed due to prior issues.

The Rock Bottom: 90% Drawdown and the Decision to Persevere

Arthur reveals the devastating 90% net worth drawdown he experienced, largely due to his personal capital being tied up in his fund, which was heavily impacted by market downturns and the 3AC collapse. Despite advice to quit, he chose to persevere, driven by a belief in his position and the facts of the situation. He views bankruptcy processes as exploitative and regrets not having better legal protections, but ultimately found strength in focusing on resolution and his own integrity.

Arthur's net worth experienced a 90% drawdown due to his significant personal investment in his fund.
Market-related drawdowns were around 50-60%, with 3AC adding another ~40%.
He received advice to shut down the fund and rethink, but chose to continue.
Bankruptcy proceedings are described as a 'scam in the trap space', with high legal fees.
Arthur believes the facts were on his side, despite some legal documents being disadvantageous.
The decision to continue was driven by a belief in himself, the facts, and a sense of having done nothing wrong.
Focusing on resolving the immediate legal issues helped push through the difficult period.
He regrets not being better protected legally before entering into certain structures with 3AC.
Another crypto individual using a similar structure with 3AC lost everything.

Lessons Learned and Rebuilding: The Second Chapter

Arthur reflects on the profound lessons learned from the hardships of 2022, viewing the experience as invaluable 'tuition'. He developed crucial skills in legal strategy and navigating complex adversarial situations. The relaunch of Defiance Capital in March 2023 signifies a new chapter, built on the resilience and wisdom gained from overcoming extreme challenges, emphasizing the benefit of learning these hard lessons early in one's career.

The difficult experiences of 2022 provided critical life lessons at an early stage of his career.
He gained expertise in legal strategizing and utilizing lawyers effectively.
The potential financial repercussions of losing legal battles (paying the other side's legal fees) were significant.
The experience is viewed as valuable 'tuition' for life and business.
Arthur relaunched Defiance Capital (Fund II) in March 2023, marking a new phase.
He believes learning these lessons early is better than at an older age when recovery is harder.
The experience honed his ability to deal with adverse situations and legal complexities.

The Current Crypto Landscape: Underpositioning and Smart Money

The current crypto market is characterized by significant underpositioning, particularly in altcoins, as much capital has moved to traditional finance or safer crypto vehicles like ETFs. This lack of widespread participation and FOMO explains the steady, dip-resistant rallies seen in strong assets. Many investors, even those seeing good fund performance, have exited due to a lack of perceived long-term value, indicating that the capital hasn't fully returned to the ecosystem.

Many crypto OGs have moved their Bitcoin into ETFs, seeking safer custody than self-custody.
This explains the success of crypto ETFs, with institutions like BlackRock involved.
Significant capital has moved from DeFi to traditional finance due to low yields and hack risks.
This off-ramped capital has not fully returned to the crypto system yet.
Even with top-quartile fund performance, redemptions occurred because investors saw no point in staying in crypto.
There is a lack of widespread FOMO (Fear Of Missing Out) in the current market.
The rally is primarily driven by existing crypto participants rotating funds.
Non-Bitcoin and non-Ethereum assets are significantly underpositioned.
This underpositioning explains the continuous rally with minimal dips for strong coins like Hyperliquid and Zcash.
Profit-taking is minimal because many holders are long-term believers or have not yet realized significant profits.

Asset Selection vs. Market Timing in the Current Regime

In the current crypto regime, the emphasis has shifted from precise market timing to strategic asset selection. The emergence of clear winners and the massive capital exodus from the space mean that identifying and holding strong assets is more crucial than ever. While past cycles were punishing, the current one appears to reward conviction, though lingering 'bare market PTSD' necessitates calculated risk-taking. The mental inertia surrounding capital re-entry suggests a prolonged period where asset selection will likely outperform speculative timing.

The current market rewards believers and those who identify winning assets.
Past cycles punished belief, but the current one may reward it.
Winners have emerged, simplifying the investment process to some extent.
Arthur still experiences 'bare market PTSD' but takes calculated risks.
The fund is selective with risk-taking and has been rewarded.
Over-allocation to a few coins could lead to future profit-taking issues.
Massive exits from crypto have created significant mental inertia for both individuals and funds.
Even large funds may think like retail investors regarding on-ramping/off-ramping crypto.
Money that left crypto may not return soon, even if the market continues to rise.
The current regime favors asset selection over precise market timing.
Holding strong assets for extended periods is key.
Mid-cap coins are more suitable for this strategy than majors due to size.

The Zcash Narrative: Bitcoin Whales and Privacy as Insurance

Zcash has experienced an extraordinary rally, attributed to Bitcoin whales reallocating capital into its privacy-focused narrative. While privacy coins historically faced challenges, Zcash's hybrid model has allowed it to maintain exchange listings and appeal to a broader audience. This, combined with concerns about Bitcoin's future (e.g., quantum computing) and global economic instability, positions Zcash as a potential hedge and a compelling investment, though its parabolic price action suggests potential consolidation.

Zcash has seen a remarkable 20x year-on-year rally from around $50 to$ 1300.
This outperformance occurred even during a bear market.
A key explanation is Bitcoin whales swapping Bitcoin for Zcash, buying into its thesis.
Privacy coins have historically underperformed and faced delisting risks.
Zcash's hybrid shielded/unshielded pool approach allows exchanges to list it while offering privacy.
This hybrid model provides a middle ground, appealing to both exchanges and privacy advocates.
Zcash is perceived as more 'techno-optimist' and less associated with 'dark money' than Monero.
This positive image makes Zcash more investable.
Bitcoin is seen as a macro asset, with increasing institutional allocation.
Concerns about quantum computing and Bitcoin's lack of vision on scalability and privacy are noted.
Zcash is viewed by some Bitcoiners as insurance against these Bitcoin issues.
High-net-worth individuals, especially outside the US, are increasingly allocating to Bitcoin due to debasement concerns.
Zcash's price action is extended, and profit-taking is expected.

Top Conviction Bets: Hyperliquid, Near, and Zcash

Arthur identifies Hyperliquid, Near Protocol, and Zcash as his top conviction bets. Hyperliquid is lauded for its execution and ambitious goals, though its valuation is a key consideration. Near is recognized for its strong founder and focus on AI, despite the inherent difficulties of building a Layer 1. Zcash's privacy narrative and potential as a hedge against Bitcoin's future challenges make it attractive, although its recent parabolic surge suggests potential consolidation. The resurgence of meme coins like Pump was an unexpected development.

Hyperliquid is a high-conviction bet, with the main question being its valuation.
It's praised for its execution, community, innovation, and market share gains from centralized exchanges.
Hyperliquid's ambitious goal is to flip NASDAQ in market cap on an FDV basis.
The team's execution and ability to navigate US regulatory challenges are noted.
Near Protocol is also a long-term bullish conviction, though considered underrated.
Building a Layer 1 is extremely challenging, requiring a clear vision and consistent execution.
Near's founder, Illia, is praised for his focus and ability to engage stakeholders.
Near's focus on AI integration is a key aspect of its current vision.
Zcash is highly bullish due to its legitimate thesis, though its parabolic price action warrants caution.
The narrative around Zcash includes Bitcoiners hedging against quantum risks and scalability issues.
Other honorable mentions include VV (privacy/inference) and Lighter.
Pump and the resurgence of meme coins were unexpected, even for DeFi-focused investors.

The Nature of Great Traders: Born or Made?

The discussion explores whether great traders are born or made. The consensus leans towards innate qualities (nature) playing a significant role, particularly for elite traders, encompassing risk tolerance, adaptability, and self-awareness. Arthur identifies himself as predominantly nature-driven, highlighting his curiosity and risk appetite. The research process for identifying investment ideas is multifaceted, combining traditional research with community insights and data analysis.

Good traders can be nurtured, but great/star traders are likely 80% born and 20% nurtured.
Key innate traits include risk-taking capacity, self-introspection, and the ability to quickly flip views while maintaining conviction.
This is compared to F1 drivers or top athletes; not everyone can reach the elite level.
Arthur considers himself 70% nature (curiosity, risk appetite) and 30% nurture.
Risk appetite tends to diminish with age.
Younger individuals have more capacity for risk due to having less to lose and more time to process gains.
Finding the 'source of truth' and identifying gaps between market understanding and reality is a characteristic of great traders.
Research involves a combination of subscriptions, social media conversations, community insights, and data analysis.
The process requires third-party checks to verify theses.

Crypto as a Playground for the Young and Ambitious

Crypto continues to be a fertile ground for young individuals to achieve significant financial success rapidly, largely due to their capacity for exploration and risk-taking. Arthur's fund leverages its extensive experience, global network, and intellectual curiosity as its edge. Sizing strategies are crucial, balancing conviction with diversification to avoid catastrophic losses and allow for adaptation. Memorable trades often involve early bets on undervalued projects with strong comeback potential.

Crypto remains a place for young people to shine, despite the influx of traditional finance professionals.
Young individuals have more mental bandwidth and time to explore emerging industries.
This allows them to gain an edge in understanding new ecosystems and trends.
Examples include young Asians making millions from Hyperliquid airdrops and early investments.
This level of wealth creation is typically unattainable in traditional careers within a similar timeframe.
Finding an 'edge' is crucial; for young people, it might be early adoption or deep engagement.
Arthur's fund's edge lies in experience, East-West connections, intellectual curiosity, and investment management skills.
Sizing strategies range from institutional (Kelly criterion) to practical fund management.
Defiance Capital typically holds 5-10 positions, with high-conviction bags up to 30-40% (rarely 50%).
Over-concentration can be detrimental, preventing pivots to new opportunities.
The most memorable trades include early conviction plays like Synthetix and SushiSwap, and recent comebacks like Near.

The Metaphysics of Crypto: Belief and Resilience

Arthur emphasizes the 'metaphysical' aspect of crypto, where unwavering belief and conviction are rewarded, even amidst seemingly irrational market behavior and negative fundamentals. The industry's resilience, its ability to overcome adversity, is attributed to its core ethos of decentralization and privacy. This fundamental strength, coupled with the creation of global communities and a shared sense of purpose, allows crypto to persist and thrive against external challenges and skepticism.

Crypto rewards believers, even when its actions appear irrational to outsiders.
Conviction and staying in the market are key to long-term success.
Despite negative fundamentals (selling pressure, regulatory issues, grifting), the industry recovers.
This resilience suggests a 'metaphysical' aspect, a belief in decentralization and privacy.
These core tenets are powerful enough to overcome negative externalities.
Early crypto predictions about government overreach and data privacy have proven true.
The KYC/AML schemes are seen as honeypots for hackers.
Crypto acts as a hedge against government overreach and global instability.
The ability to build international communities bridges geopolitical divides.
The 'trauma bond' of shared experiences in crypto fosters connection.
Belief in the core ethos of decentralization and privacy is paramount.

Final Advice: Compartmentalize Risk and Stay Believing

Arthur's final advice centers on establishing a clear, committed allocation to crypto and sticking to it, thereby managing risk and mental compartmentalization. He reiterates the importance of sustained belief and conviction, asserting that the crypto market ultimately rewards those who remain dedicated. Despite prevailing negativity, the industry's inherent strengths in decentralization and privacy provide a foundation for future recovery and growth.

Decide on your desired allocation and optimal risk level in crypto and stick to it.
This approach helps manage comfort with risk and mentally compartmentalizes crypto-specific risk.
Staying belief is crucial for long-term rewards.
The crypto market rewards those who remain committed.
The current market, despite negative sentiment, shows signs of recovery and potential.
The core values of decentralization and privacy are strong enough to drive future growth.