In crypto, it is easy to believe that running a fund starts and ends with trading. If the strategy works, capital follows. If returns are strong, structure can come later. This mindset is understandable in an industry that grew out of open-source code, permissionless markets, and fast experimentation.
It is also the reason many crypto funds struggle to scale, fail institutional due diligence, or quietly shut down despite having a real edge.
Trading is only one layer of a crypto fund. The rest of the stack is infrastructure, governance, and operational plumbing. Most fund managers underestimate this until it becomes the bottleneck.
Strategy is visible. Infrastructure is invisible until it breaks
When a crypto fund launches, the strategy is usually the most developed component. The code is live. The models have been tested. Exchange connections are in place. Execution works.
What is often missing is everything around it.
Who controls the private keys? How are assets custodied? What happens when funds move between cold storage and exchanges? How is NAV calculated? How are investors onboarded and screened? Who signs off on governance decisions? How do regulators see the structure? How will an auditor verify balances across wallets and venues?
None of this affects daily PnL until it suddenly does.
Custody is not just a wallet choice
Many fund managers treat custody as a technical preference rather than a risk framework. Hot wallets, cold wallets, MPC, exchanges, self-custody. All of these are tools, not solutions.
From an institutional perspective, custody answers much deeper questions. Are assets segregated? Who has the authority to move them? What controls exist to prevent unilateral action? What happens if a service provider fails? Are assets protected in an insolvency scenario?
For funds that trade actively, assets inevitably sit on exchanges. That introduces exchange counterparty risk. In many cases, those assets are no longer covered by cold storage protections or insurance while deployed for trading. That is not a flaw, but it is a risk that must be understood, disclosed, and governed.
Fund managers often discover during due diligence that investors care less about where the alpha comes from and more about where the assets sleep at night.
NAV and reporting are not trivial in crypto
Traditional funds rely on administrators to calculate NAV using well-established pricing feeds and settlement conventions. Crypto funds operate across fragmented markets, decentralized venues, and wallets that do not fit neatly into legacy systems.
Pricing sources vary. Liquidity varies. Assets may be staked, locked, bridged, or subject to protocol rules. Corporate actions look like forks and airdrops, not dividends and splits.
A fund that cannot produce a consistent, auditable NAV will struggle to raise institutional capital regardless of performance. The infrastructure to support valuation, reconciliation, and reporting needs to exist from day one, not after the first allocation.
Governance is not optional at scale
Early-stage crypto funds often operate informally. Decisions are made quickly. Controls are light. That flexibility can be an advantage when capital is small and the team is tight.
It becomes a liability as assets grow.
Investors expect boards. They expect independent oversight. They expect conflicts to be documented and managed. They expect clear delegation between the investment manager, the operators, and the service providers.
Regulators expect the same.
Governance is not about slowing innovation. It is about ensuring that when something goes wrong, there is a framework to respond without destroying trust.
Compliance is part of the product, not a tax on it
AML, KYC, sanctions screening, FATCA, CRS. These are not exciting topics for fund managers who want to build and trade. But they are non-negotiable for funds that want to interact with real capital.
Many crypto-native managers assume compliance can be bolted on later or outsourced cheaply. In reality, compliance is embedded in onboarding flows, investor communications, reporting cycles, and governance processes.
A fund that gets compliance wrong does not just face regulatory risk. It faces banking risk, counterparty risk, and reputational risk.
Institutional capital does not fund experiments
There is a persistent belief in crypto that institutions will eventually relax their standards as the asset class matures. The opposite is happening.
Institutional allocators are applying more scrutiny, not less. They are comparing crypto funds to traditional hedge funds and asking why standards should be lower, not higher.
They are comfortable with volatility. They are not comfortable with operational ambiguity.
The CV5 platform model exists for a reason
This is why many of the most successful crypto fund managers no longer build everything themselves. They launch within established platforms that provide custody frameworks, governance, compliance, administration, and regulatory alignment out of the box.
The platform absorbs the operational complexity so the manager can focus on strategy and execution. Investors get consistency. Managers get credibility. Growth becomes possible.
At CV5 Capital, this pattern repeats itself. The funds that scale fastest are not always the ones with the most aggressive strategies. They are the ones who treat infrastructure as seriously as alpha.
Crypto funds are becoming financial institutions
Whether fund managers like it or not, running a crypto fund increasingly resembles running a financial institution. The tools are different. The markets are new. But the expectations around risk management, governance, compliance, and transparency are converging fast.
Trading tokens is the visible part of the job. The infrastructure underneath it determines whether the fund survives success.
Fund managers who understand this early build funds that last. Those who do not often learn the lesson the hard way.
Written by CV5 Capital, a Cayman-based platform supporting institutional crypto funds with governance, custody, and operational infrastructure.
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This story was published under HackerNoon’s Business Blogging Program.
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