Hedge Funds Show Growing Interest in Meme Coins

According to Bloomberg, the allure of meme coins is increasingly attracting the attention of hedge funds. Stratos, a hedge fund whose limited partners include venture capitalists, is one such example. Rennick Palley, the founding partner of Stratos, stated that if the fund isn't investing in meme coins, the individuals working at the fund are likely doing so. Despite the skepticism surrounding meme coins, hedge funds have been active in the crypto world, drawn by various strategies. Quinn Thompson, founder of Lekker Capital, compared the frenzy around meme coins to the retail frenzy seen with GameStop and meme stocks in traditional markets. He described it as the 'tip of the spear for speculation' and equated it to gambling. Dogecoin, the first meme coin launched in 2014, is currently the eighth-largest cryptocurrency with a market value of approximately $22 billion, according to CoinMarketCap. While many retail investors have experienced losses, professional investors have largely stayed away until the recent crypto boom. Cosmo Jiang, a portfolio manager at Pantera, noted that meme coins, initially started as a joke, have evolved into 'culture coins' representing a group of people with a shared belief system. The creation and launch of memes have become easier with apps like Pump.fun, and blockchains like Solana and Base offering low trading fees have been flooded with these tokens. Josh de Vos, research lead at CCData, highlighted that the infrastructure surrounding meme coins has improved, with centralized exchanges developing sophisticated futures markets for leading meme coins. This has allowed hedge funds to capitalize on their volatile movements and effectively hedge their exposure. As more hedge funds start taking meme coins more seriously, Palley expects the focus on these highly speculative tokens to increase. He anticipates more firms creating meme-only funds, similar to the creation of NFT-only funds. However, it's worth noting that NFTs have proven to be unreliable investments, with the market showing significant volatility.