After venture capital firm Stratos boasted 300x profits from an investment in Solana meme coin Dogwifhat (WIF), other hedge funds started to consider meme coins as a legitimate investment. So, why did Stratos believe in a Shiba Inu with a hat?
The California-based firm invested in WIF in December when it was around $0.01. And it’s still holding onto its stash of WIF, which is now trading for $2.76 according to CoinGecko data.
Prior to investing in WIF, Stratos had invested in some of the “blue chip” meme coins—the likes of Dogecoin, PepeCoin, and Shiba Inu. Due to its small team, Stratos says it was able to be quick on its feet when they first got a whiff of WIF.
“Normally, you will spend months doing due diligence before you actually make an investment. That obviously doesn’t work for memes,” Rennick Palley, founding partner of Stratos, told Decrypt. “The reason why we designed the fund the way it is, is because we've been in crypto long enough to know how it works.”
WIF is the latest dog-based meme coin on the Solana blockchain. It doesn’t pretend to be anything it isn’t, explaining on its website that it’s “literally just a dog wif a hat.” With no utility, the community has turned to guerrilla marketing to boost the tokens value, with the project currently aiming to get its furry mascot plastered on the Las Vegas Sphere.
When asked about why Stratos invested in WIF, Palley outlined that the firm believed it could become a blue chip meme coin as it wasn’t too dissimilar to the things that worked in the past. For starters, the meme coin is built around a Shiba Inu dog.
“But it was unique in that… it had a hat,” Palley laughed. “It is literally everything. Because it would just be shit [without the hat].”
Despite believing in it, the firm only started with a “very small position” as it was aware that small market cap meme coins can just as easily tank 80% as it can climb the same amount.
“If you're someone who is like ‘Hey, my goal is to take a few thousand bucks that I have and potentially turn that into $100,000 or a million.’” Palley told Decrypt, “You’re better off doing it in memes than you are in these more productive tokens. It's kind of like this subset of this concept of financial nihilism.”
This line of thinking, Palley explained, is that the traditional path for saving and investing is no longer viable because the system is now broken. He alluded to unaffordable housing, rising inflation, or bad governmental policies that have made the firm feel jaded by the traditional system. So, instead, they’ve turned to alternative assets with meme coins taking center stage.
Despite striking gold with WIF—the firm still holds the “majority” of its original position today—Stratos won’t be apeing into small market cap meme coins. Instead, it’ll be taking a more calculated approach as it believes the market is currently in a meme coin supercycle.
“I think meme coins as an asset class within crypto are going to be probably the best performing sector this cycle,” Palley explained. “So we're going to continue to have an overweight position in memes as a category. But we're not going to increase the amount of risk that we take on trying to find the next WIF.”
Lightning doesn’t strike twice, is the thought process at Stratos. Despite the great pick this time around, the firm could easily lose next time.
“Let's not over leverage, let's not spend all our time punting on memes and then miss the boat on Bitcoin, ETH and SOL—which is actually what's driven most of our performance.” Palley finished. “The key in crypto is survival. So that's our focus.”
Edited by Stacy Elliott.