Hedge Funds Fall For The Memecoin Frenzy: “Mind-Boggling” Returns Tempt Financial Giants
April 23 2024 - 8:30PM
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In a recent Bloomberg report, it has come to light that the hedge
fund industry is increasingly drawn to the allure of the memecoin
sector, given the recent price increases and substantial profits
that surpass those of Bitcoin (BTC) or the largest altcoins in the
market. Related Reading: This Metric Printed In 2017 Before Bitcoin
Exploded: Is A Mega Run Incoming? Memecoin Mania One example of the
appeal of memecoins to traditional finance institutions is Newport
Beach-based Stratos, which launched a liquid fund with the
Dogwifhat token in December. The Solana-based memecoin
Dogwifhat, known for its mascot – a beanie-wearing dog – became a
major player in the crypto world, with its price increasing more
than 300 times. This substantial spike reportedly helped
Stratos achieve a staggering 137% return in the first quarter of
2024, outperforming gains in the broader crypto market. However,
Dogwifhat has since retraced more than 35% from its March 31
all-time high (ATH) of $4.83 and is currently trading at $3.09.
Interestingly, Stratos is not alone in venturing into memecoins;
other hedge funds are also doing so. Asset manager Brevan
Howard, for instance, has reportedly made a “tiny” investment in
memecoins. Pantera Capital, a crypto fund, recently emphasized the
staying power of memecoins and the “enormous” trading opportunities
they present. Is It Just Gambling? Despite the enthusiasm
from some hedge funds, the report notes that many crypto
participants remain skeptical of memecoins. Quinn Thompson,
the founder of Lekker Capital, a hedge fund experimenting with
trading memecoins, likened the current frenzy to the speculative
fervor seen in traditional markets with stocks like GameStop.
In addition, Thompson described memecoins as the “tip of the spear
for speculation” and emphasized the “gambling-like” nature of their
trading. Still, Cosmo Jiang, a portfolio manager at Pantera
Capital, noted the evolution of memecoins beyond mere jokes,
calling some “culture 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 fees, have been flooded with these tokens.
In light of these developments, Josh de Vos, research lead at
CCData, highlighted the improved infrastructure supporting
memecoins, including increased liquidity and the development of
advanced futures markets on centralized exchanges (CEX). As
more hedge funds take memecoins seriously, Rennick Palley of
Stratos anticipates a growing focus on these crypto assets.
Drawing parallels to the initial skepticism surrounding
cryptocurrencies, Palley suggests that meme-only funds may emerge,
mirroring the creation of non-fungible token (NFT) funds. Related
Reading: XRP Wallets Holding At Least 1 Million Coins Nears
All-Time High As Sentiment Improves 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, delivering massive average returns of 1312.6% across 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% in the last seven days. It has a market
cap of $23 billion. Featured image from Shutterstock, chart
from TradingView.com
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