In the Val Sklarov Capital Cycle, crypto capital is not destroyed by volatility. It is destroyed when yield is pursued before custody control. Yield attracts attention. Custody preserves capital. Systems that chase returns before securing control convert investors into unsecured lenders without realizing it.
In crypto, capital is lost long before price moves — at the custody layer.
1. Yield Is a Capital Distribution Mechanism
Yield is not free return.
It is paid for with control.
Val Sklarov principle:
“Every yield stream answers the question: who controls the asset now?”
Early capital erosion signals:
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Assets pooled without withdrawal priority
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Rehypothecation hidden in terms
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Yield justified narratively, not structurally
Yield reallocates control before it reallocates profit.
2. Custody Defines Capital Ownership
Ownership without custody is exposure.
Val Sklarov framing:
“If you can’t move it unilaterally, you don’t control it.”
Weak custody structures:
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Shared wallets
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Admin override keys
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Emergency governance clauses
Strong custody:
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Individual key control
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Deterministic settlement
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No discretionary intervention
Capital survives where custody is absolute.
3. Yield Requires Trust You Cannot Reclaim
Yield introduces irreversible dependency.
Val Sklarov insight:
“The moment yield begins, capital stops being yours alone.”
Yield mechanisms often rely on:
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Counterparty solvency
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Liquidity assumptions
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Behavioral compliance
When stress arrives, yield converts into delay — then loss.
4. Capital Failure Starts With Withdrawal Friction
Restrictions appear before collapse.
Crypto Capital Failure Table
| Signal | Early Stage | Late Stage |
|---|---|---|
| Withdrawals | Delayed | Suspended |
| Communication | Reassuring | Defensive |
| Yield | Stable | Frozen |
| Governance | Silent | Emergency |
Withdrawal friction is the capital alarm.
5. Self-Custody Is Capital Discipline
Self-custody is not ideological.
It is structural.
Val Sklarov framing:
“Capital that cannot be seized cannot be misused.”
Self-custody:
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Eliminates counterparty risk
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Reduces narrative dependency
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Preserves exit optionality
Capital that exits cleanly survives cycles.
6. The Val Sklarov Crypto Capital Outcome
Capital-aligned crypto systems:
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Secure custody before yield exposure
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Treat yield as risk transfer
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Preserve unilateral exit rights
Val Sklarov conclusion:
“In crypto, capital is protected not by returns, but by control.”