In a recent Bloomberg reportIt has emerged that the hedge fund industry is increasingly drawn to the allure of the memecoin sector, given recent price increases and substantial profits that exceed those of Bitcoin (BTC) or the largest altcoins on the market.
Memecoin mania
One example of memecoins' appeal to traditional financial institutions is Newport Beach-based Stratos, which launched a liquid fund with the Dogwifhat token in December.
The memecoin based on Solana dogwifhatknown for its mascot – a dog wearing a beanie – has become a major player in the crypto world, with its price increasing more than 300 times.
This substantial rise reportedly helped Stratos achieve a staggering 137% return in the first quarter of 2024, outperforming the broader crypto market's gains. However, Dogwifhat has since retraced more than 35% since its March 31st. record level (ATH) of $4.83 and is currently trading at $3.09.
Interestingly, Stratos is not the only one venturing into memecoins; other hedge funds do it as well.
Asset manager Brevan Howard, for example, reportedly made a “tiny” investment in memecoins. Pantera Capital, a crypto fund, recently highlighted the sustainability of memecoins and the “huge” business opportunities they present.
Is it just gambling?
Despite the enthusiasm of some hedge funds, the report notes that many crypto participants remain skeptical of memecoins.
Quinn Thompson, founder of Lekker Capital, a hedge fund experimenting with memecoin trading, compared the current situation frenzy to the speculative fervor observed in traditional markets with stocks like GameStop.
Additionally, Thompson described memecoins as the “tip of the speculation spear” and highlighted the “gaming-like” nature of their trading.
Still, Cosmo Jiang, portfolio manager at Pantera Capital, noted the evolution of memecoins beyond simple jokes, calling certain “cultural coins” that symbolize membership in a particular group or belief system.
The report notes that the ease of creating and launching memecoins has increased with the availability of apps like Pump.fun, which allow users to mint coins in minutes. Blockchains like Solana and Coinbase's Base, which offer low trading feeswere flooded with these tokens.
In light of these developments, Josh de Vos, Head of Research at CCData, highlighted improvements in the infrastructure supporting memecoins, including increased liquidity and the development of advanced futures markets on centralized exchanges (CEXs). .
As more hedge funds take memecoins seriously, Rennick Palley of Stratos foresees an increasing focus on these crypto assets.
Drawing parallels with the initial skepticism surrounding cryptocurrencies, Palley suggests that meme-only funds could emerge, mirroring the creation of non-fungible token (NFT) funds.
To further demonstrate the interest and adoption of these emerging tokens, in the first quarter of 2024, memecoins emerged as the most profitable crypto narrative, offering massive average returns of 1312.6% on its top tokens, according to a recent study conducted by CoinGecko.
Currently, the largest memecoin on the market, Dogecoin (DOGE), is trading at $0.1616, up 5% over the past seven days. Its market capitalization stands at $23 billion.
Featured image from Shutterstock, chart from TradingView.com
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