_This article is from: _Ambcrypto & Cointelegraph

Translation｜Odaily Planet Daily（@OdailyChina）；Translator｜Moni

After experiencing what can only be described as "torturous" fourth quarter of 2025, the cryptocurrency market finally showed signs of recovery in early 2026.

Surprisingly, it was not Bitcoin or Ethereum that ignited the crypto market at the start of the new year, but Meme coins, which are making a strong comeback after a period of calm during the holidays and a sluggish market.

Is the cycle of capital rotation repeating?

Frankly speaking, this round of Meme coin market is not unexpected. At the end of 2025, market liquidity dried up, FUD sentiment spread, and retail investors' risk tolerance dropped to a yearly low. The market capitalization of Meme coins fell by over 65%, hitting a low of $35 billion on December 19, leading to a decrease in traders' risk tolerance. After Christmas, Bitcoin remained volatile, and mainstream assets lacked direction, naturally causing funds to shift towards more resilient high Beta targets, with Meme coins perfectly filling this gap.

According to CoinMarketCap data, 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 29, 2025. Among them, the top three Meme coins by market capitalization saw significant weekly gains: DOGE rose nearly 20%, SHIB increased by 18.37%, and PEPE surged by 64.81%.

At the same time, the trading volume of Meme coins also soared alongside the market capitalization, jumping from $2.17 billion on December 29, 2025, to $8.7 billion this past Monday, an increase of 300%.

From a data perspective, this rise in Meme coins is not a "freak market" of a single token, but a broad sector-wide recovery. Meanwhile, the heat of social media discussions and on-chain transaction volumes have both amplified, indicating that attention and liquidity are returning, rather than just a simple price increase.

Technical alignment: The rebound of Meme coins is not without basis

Meme coins are among the highest-risk assets in cryptocurrency. When prices rebound, it may indicate that investors are willing to take on higher risks again. From a macro technical structure perspective, the TOTAL3 indicator (total market capitalization of crypto assets excluding BTC) shown in the chart below indicates that the crypto market has shifted from a downtrend to a recovery phase, suggesting that market behavior has changed from "sell on the rebound" to "buy on dips."

Currently, TOTAL3 is testing a key resistance level of approximately $848 billion, which corresponds to both the 200-day moving average and the medium-term trend line. If it breaks through and stabilizes above this level, the technical target could rise to $900 billion, providing space for the continuation of rebounds in altcoins and Meme coins.

From the internal structure of the sector, Meme coins are showing clear signs of systemic strengthening. The recent rise is not concentrated in a single asset but covers multiple varieties such as PEPE, BONK, DOGE, FLOKI, and MOG, spanning both the ETH and SOL ecosystems. This broad participation typically indicates that funds are being allocated at the sector level rather than short-term speculation on individual assets. Historical cycles also show that during Bitcoin's consolidation phase, high Beta assets often rebound first to test the market's risk tolerance.

Leverage and sentiment: Bulls are entering, but leverage risk is accumulating

The derivatives market for Meme coins has also rapidly heated up. Coinglass data shows that the trading volume of DOGE's open contracts has increased by 45.41% in the past 24 hours, with an open interest of $1.941 billion. PEPE grew by 33.32%, with an open interest of $514 million, while SHIB increased by 93.66%, WIF by 123.39%, and PENGU by 69.04%.

Open contracts are typically used as a core indicator to determine whether "real money is entering the market," as this metric reflects the total amount of unsettled derivatives contracts, with each seller's transaction having a corresponding buyer settlement. The current price rebound of Meme coins has been validated by the simultaneous increase in open contracts and trading volume. Represented by PEPE and DOGE, multiple Meme coins have seen significant increases in derivatives trading volume alongside price rises, indicating a strong bullish momentum in the market, as leveraged traders expect prices to rise and open more contracts, suggesting real bullish positions rather than mere short covering.

Of course, the rapid expansion of open contracts also means that leverage exposure is accumulating simultaneously. Considering that the fundamental support for Meme coin assets is limited and their pricing is highly dependent on sentiment, increased activity on high-leverage platforms could significantly amplify short-term volatility. Historically, Meme coins often act as the "canary in the coal mine": they can reflect changes in risk appetite earliest but are also the most likely to drop sharply when sentiment reverses. If market sentiment turns or external shocks occur, overly concentrated bullish positions could trigger rapid deleveraging and chain liquidation risks. Therefore, while the derivatives data provides positive validation for the current rebound, its structure also indicates that short-term pullback risks should not be overlooked.

The altcoin rally may follow the footsteps of Meme coins, potentially benefiting SOL

On-chain analysis platform Santiment previously posted on X platform analyzing that this round of Meme coin rebound began a few days after Christmas, when FUD sentiment among retail traders reached its peak, and the assets that retail investors are least optimistic about often rebound first in the crypto market.

As market funds begin to diversify into "other" areas like Meme coins, altcoins may also soon see a rally. Historical data shows that the altcoin that benefits the most from the Meme coin craze is SOL.

Meme coins have been one of the main growth engines for Solana, driving user activity and cultural influence over the past few years. This activity has helped attract developers and traders to the network and played a significant role in the revival of decentralized finance on Solana. Meanwhile, the dominance of meme coin trading has influenced investors' and financial institutions' perceptions of the network, often linking Solana's growth to speculative cycles.

Igor Stadnyk, co-founder and AI head of True Trading, stated that Meme coins have become part of Solana's cultural identity and are a liquidity engine attracting users. However, the next phase of Solana's growth may 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.

Is this a prelude to recovery? Or a classic bull market trap?

Given that the current crypto market has not fully emerged from its sluggish state, there is some skepticism within the community regarding this Meme coin craze: Is this a prelude to a comprehensive recovery, or a short-lived sentiment-driven rebound?

Optimists believe that the strong rebound of Meme coins indicates a return of risk appetite in the crypto market, which may lead to a subsequent rise in altcoins and even mainstream assets; on the other hand, however, the characteristics of social media-driven momentum, amplified leverage, and prices far below historical highs seem to closely resemble past "bull market traps." For traders, this is not a signal to blindly chase highs, but rather a phase that requires high discipline, quick responses, and strict risk control.

What is certain is that Meme coins have initiated the first wave of the crypto market in 2026. Whether this will illuminate a new round of bull market or burn too brightly and backfire on the market? The answer may soon be revealed.

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