A recent revelation has stirred the financial world as the hedge fund industry finds itself captivated by the burgeoning memecoin sector, lured by soaring prices and monumental profits that outpace those boasted by Bitcoin or any of the largest alternate cryptocurrencies currently on offer.
The pull of these playful digital tokens manifests in the actions of Newport Beach outfit Stratos, jumping onto the bandwagon in December with the creation of a liquid fund based around the Dogwifhat memecoin. Famed for its beanie-sporting canine symbol, this token on the Solana blockchain has swiftly ascended to an influential position in the virtual currency world, its value experiencing a galactic surge over 300-fold.
This remarkable climb played a pivotal role in rocketing Stratos to a jaw-dropping 137% return in the early trimester of 2024, its success overshadowing progress seen across the wider crypto market. Notwithstanding this dizzying triumph, Dogwifhat has slipped over 35% from its $4.83 apogee on March 31, now circulating at a modest $3.09.
However, Stratos is far from isolated in its memecoin dealings. A swathe of its industry peers are also dipping their toes into these uncharted waters. Asset managers from Brevan Howard have purportedly invested – albeit limitedly – in the memecoin sector, while crypto fund Pantera Capital has voiced its belief in the enduring nature of memecoins and the colossal trading prospects they proffer.
Yet the burgeoning enthusiasm observed in select hedge funds is not echoed across the board. Indeed, the report pinpoints notable skepticism amongst a significant portion of crypto participants. Lekker Capital’s helmsman, Quinn Thompson, likens the current whirlwind to the fevered speculation witnessed in standard markets with stocks such as gaming retailer GameStop. Thompson further characterizes memecoins as a hotbed of speculation, spotlit by risk-infused, gambling-style trading.
Nonetheless, Pantera Capital’s portfolio manager, Cosmo Jiang, identifies a maturation in the scope of memecoins, with some now representing “culture coins,” reflecting affiliation to a specific group or ideological belief.
This evolution is facilitated by easily accessible apps like Pump.fun, enabling users to mint new coins within minutes. A barrage of these freshly minted tokens has ensued, largely populating blockchains such as Solana and Coinbase’s Base, renowned for their minimal trading fees.
Tracking these progressions, research lead at CCData, Josh de Vos, underlines the comprehensive infrastructure enveloping memecoins, showcasing amplified liquidity and the advent of sophisticated futures markets on centralized exchanges.
As memecoins begin to garner the serious attention of hedge funds, an upward trajectory in focus on these virtual assets is prefigured by Stratos’ Rennick Palley, evoking memories of the origin skepticism that surrounded cryptocurrencies.
By the first quarter of 2024, memecoins emerged fiscally triumphant. They were crowned the most profitable cryptos, yielding spectacular mean returns of 1312.6% across their prime tokens, a recent CoinGecko study reveals. As an example of this meteoric rise, the heftiest memecoin in terms of market cap, Dogecoin, is currently priced at $0.1616 – a 5% raise in the past week, backing its $23 billion market heavyweight status.
