According to a report from Bloomberg, hedge funds are now being drawn towards crypto memecoins in search of greater profits. One such fund, Stratos, based in Newport Beach, California and backed by investors Marc Andreessen and Chris Dixon, reportedly achieved gains of 137% in the first quarter by including dogwifhat (WIF), currently the largest memecoin on Solana (SOL), in its portfolio.

Rennick Pallet, the founding partner of Stratos, states, “The unspoken truth is that if the fund isn’t doing it, the people working at the fund are doing it.” While memecoins initially started as a joke, with the launch of Dogecoin (DOGE) in 2013, Pallet believes that more hedge funds will begin to take the sector more seriously as they become more comfortable with digital assets in general. He adds, “People will become more comfortable with the concept over time, similar to how people became comfortable with crypto overall… I wouldn’t be surprised if firms create meme-only funds, just as they created NFT-only funds.”

Cosmo Jiang, a portfolio manager at crypto hedge fund Pantera Capital, describes memecoins as “culture coins” that provide a sense of unofficial membership in a group or movement. He explains, “Meme coins initially started as a clear joke. But over time, they’ve evolved into something much more. People have started to view some memecoins as culture coins, representing membership in a culture or a group of people with shared beliefs.”

Josh de Vos, research lead at CCData, a research firm, notes that the liquidity and infrastructure in the memecoin sector are rapidly advancing. This allows traditional finance firms, which are typically more cautious about low liquidity, to participate. De Vos states, “Since the last cycle, the infrastructure surrounding memecoins has become more robust, with significant improvements in liquidity for several tokens… Centralized exchanges have developed sophisticated futures markets for leading memecoins, enabling hedge funds to take advantage of their volatile movements and effectively hedge their exposure.”

As of now, DOGE remains the largest memecoin with a market capitalization of $22 billion, but it faces competition from Shiba Inu (SHIB) at $15 billion and WIF at $3.2 billion.

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