Source: Ambcrypto & Cointelegraph
Compiled by | Odaily Planet Daily (@OdailyChina); Translator | Moni
After enduring what can be described as a "grueling" fourth quarter of 2025, the cryptocurrency market is finally showing signs of recovery at the beginning of 2026.
Contrary to many expectations, the asset class that ignited the crypto market at the start of the new year was not Bitcoin or Ethereum, but Meme coins. After a period of quiet holidays and sluggish market activity, Meme coins are making a strong comeback.
Is the Capital Rotation Cycle Repeating?
Frankly, this round of Meme coin activity is not abrupt. At the end of 2025, market liquidity dried up, FUD sentiment spread, and retail investors' risk appetite hit a yearly low. The market capitalization of Meme coins fell by over 65%, hitting a yearly low of $35 billion on December 19th. Traders' risk tolerance decreased. After Christmas, with Bitcoin maintaining a sideways trend and mainstream assets lacking direction, capital naturally flowed towards more resilient high-beta assets, and Meme coins filled this gap.
Data from CoinMarketCap shows that the overall market capitalization of the Meme coin sector has surpassed $47.7 billion, an increase of nearly $10 billion from $38 billion on December 29th, 2025. Among the top three Meme coins by market cap, DOGE rose nearly 20% weekly, SHIB gained 18.37%, and PEPE surged 64.81%.
Meanwhile, the trading volume of Meme coins has also soared along with the market cap, jumping from $2.17 billion on December 29th, 2025, to $8.7 billion this Monday, an increase of 300%.
From a data perspective, this Meme coin rally is not a "pump" of a single token but a broad-based sector-wide recovery. At the same time, social media discussion heat and on-chain trading volume have amplified simultaneously, indicating that attention and liquidity are returning, not just a mere price pump.
Technical Support: The Meme Coin Rebound Is Not Without Basis
Meme coins are among the riskiest asset classes in cryptocurrency. When their prices rebound, it may signal that investors are willing to take on higher risk again. From a macro technical structure perspective, the TOTAL3 indicator (total market cap of crypto assets excluding BTC) shown in the chart below indicates that the crypto market has transitioned from a downtrend to a repair phase, suggesting market behavior has shifted from "selling on rallies" to "buying the dip".
Currently, TOTAL3 is testing a key resistance level around $848 billion, an area that coincides with the 200-day moving average and the medium-term trendline. If it breaks through and holds above this level with volume, the technical target could rise to $900 billion, providing room for continued rebounds in altcoins and Meme coins.
Looking at the internal structure of the sector, Meme coins show clear signs of systematic strength. The recent gains are not concentrated in a single asset but cover multiple varieties including PEPE, BONK, DOGE, FLOKI, MOG, spanning both ETH and SOL ecosystems. This broad participation typically signifies that capital is being allocated at a sector level, not just short-term speculation on individual tokens. Historical cycles also show that during Bitcoin's sideways phases, high-beta assets often rebound first to test market risk appetite.
Leverage and Sentiment: Longs Enter but Leverage Risk Accumulates Simultaneously
The Meme coin derivatives market is also heating up rapidly. Data from Coinglass shows that DOGE's open interest value increased by 45.41% in the past 24 hours, reaching $1.941 billion; PEPE grew by 33.32%, with open interest reaching $514 million; SHIB grew by 93.66%; WIF grew by 123.39%; PENGU grew by 69.04%.
Open interest is often a core indicator used to judge whether "real money is entering the market," as it reflects the total volume of outstanding derivative contracts, where every sell trade has a buy side to settle. This Meme coin price rebound has been validated by a simultaneous increase in open interest and trading volume. Represented by PEPE and DOGE, several Meme coins saw significantly amplified derivatives trading volume alongside price increases. This synchronicity usually indicates good bullish momentum, as leveraged traders open more contracts expecting price rises, suggesting genuine long positioning rather than mere short covering.
Of course, the rapid expansion of open interest also means leveraged exposure is accumulating simultaneously. Considering Meme coin assets themselves have limited fundamental support and pricing highly depends on sentiment, increased activity on high-leverage platforms could significantly amplify short-term volatility. Historical experience shows that Meme coins are often the "canary in the coal mine" for market trends: they can最早 reflect changes in risk appetite but are also the most prone to plummet rapidly when sentiment reverses. Once market sentiment reverses or external shocks occur, overly concentrated long positions could trigger rapid deleveraging and cascading liquidation risks. Therefore, while derivative data provides positive validation for the current rebound, its structure also suggests short-term pullback risks cannot be ignored.
Altcoin Rally Might Follow Meme Coins' Footsteps, Potentially Benefiting SOL
On-chain analytics platform Santiment previously posted on platform X分析称,分析称 (analyzing that) this Meme coin rebound started a few days after Christmas, when FUD sentiment among retail traders reached its peak, and the crypto market often sees the first rebounds in assets that retail investors are most bearish on.
As market capital begins to disperse into "other" areas like Meme coins, altcoins may also soon see a rally. Historical data suggests that the altcoin that benefits the most from Meme coin mania is SOL.
Meme coins have been a primary growth engine for Solana, driving user activity and cultural influence over the past few years. This activity helped attract developers and traders to the network and played an important role in the revival of Solana's decentralized finance. Meanwhile, the dominance of meme coin trading has influenced the perception of the network by investors and financial institutions, often linking Solana's growth to speculative cycles.
Igor Stadnyk, Co-founder and AI Lead at True Trading, stated that Meme coins have become part of Solana's cultural identity and a liquidity engine for attracting users, but the next phase of Solana's growth might come from applications that rely less on viral speculation and more on sustained execution, such as on-chain perpetual futures and AI-native trading agents.
Prelude to Recovery? Or a Classic Bull Trap?
Given that the current crypto market has not fully emerged from its sluggish state, there is also some skepticism within the community about this Meme coin热潮 (craze): Is it the prelude to a full recovery, or an emotion-driven short-lived rebound?
Optimists believe that the strong rebound of Meme coins signifies the return of risk appetite in the crypto market, and subsequently, altcoins,甚至 (even) mainstream assets, might接力上涨 (take over the rally). On the other hand, characteristics like social media driving, leverage amplification, and prices far below historical highs seem highly similar to past "bull traps." For traders, this is not a signal to blindly chase highs, but a phase requiring high discipline, quick reactions, and strict risk control.
But one thing is certain: Meme coins have kicked off the first wave of the 2026 crypto market. Will it illuminate a new bull market, or burn too brightly and consume the market? The answer will likely be revealed soon.
