Contrary to many people’s expectations, the spark for the crypto market at the beginning of the new year was not Bitcoin or Ethereum, but Meme coins. After a period of calm holidays and sluggish market activity, Meme coins are making a strong comeback. This article is based on pieces from Ambcrypto & Cointelegraph, compiled, translated, and written by Odaily Planet Daily.

(Previous context: Bitcoin reaches 90,000 USD, why do meme coins PEPE and DOGE always lead during rallies?)

(Additional background: CZ’s beloved dog meme coin BROCCOLI714 surges tenfold then crashes, founder Vida of the formula: How did I make millions from it?)

Table of Contents

• Is the capital rotation cycle repeating?
• Technical analysis: Meme coin rebound is not without basis
• Leverage and sentiment: Bulls entering but leverage risks accumulating
• Altcoins may follow Meme coins’ footsteps, potentially benefiting SOL
• Is this a prelude to recovery? Or a classic bull trap?

After experiencing what can be called a “tormenting” Q4 of 2025, the cryptocurrency market finally shows signs of recovery in early 2026,

Contrary to many people’s expectations, the spark for the crypto market at the beginning of the new year was not Bitcoin or Ethereum, but Meme coins. After a period of calm holidays and sluggish market activity, Meme coins are making a strong comeback.

Is the capital rotation cycle repeating?

Frankly speaking, this round of Meme coin rally is not abrupt. By the end of 2025, market liquidity dried up, FUD sentiment spread, and retail investors’ risk tolerance dropped to the lowest point of the year. Meme coin market cap fell over 65%, hitting a low of $35 billion on December 19, a new low for the year, with traders’ risk appetite waning. After Christmas, Bitcoin remained volatile, mainstream assets lacked direction, and funds naturally shifted to more flexible high Beta targets, with Meme coins filling this gap.

Data from CoinMarketCap shows that the overall market cap of Meme coins has surpassed $47.7 billion, an increase of nearly $10 billion from December 29, 2025, when it was $38 billion. Among the top three Meme coins by market cap, DOGE surged nearly 20% in a week, SHIB increased 18.37%, and PEPE rose 64.81%.

Meanwhile, trading volume for Meme coins also soared along with market cap, jumping from $2.17 billion on December 29, 2025, to $8.7 billion this Monday, a 300% increase.

From a data perspective, this Meme coin rally is not just a “single token phenomenon,” but a broad sector-wide rebound. At the same time, social media discussion heat and on-chain transaction volume have increased simultaneously, indicating that attention and liquidity are flowing back, rather than just price increases.

Technical analysis: Meme coin rebound is not without basis

Meme coins are among the riskiest cryptocurrencies. When their prices rebound, it may indicate that investors are willing to take on higher risks again. From a macro technical perspective, the chart below shows the TOTAL3 (total market cap of all crypto assets excluding BTC) indicator has shifted from a downtrend to a recovery phase, suggesting market behavior has moved from “rebound and sell” to “buy on dips.”

Currently, TOTAL3 is testing a key resistance around $848 billion, which coincides with the 200-day moving average and medium-term trendline. If volume increases and it breaks through and stabilizes, the technical target could reach $900 billion, providing room for continued rebounds of altcoins and Meme coins.

Internally, the sector shows clear signs of systemic strength. Recent gains are not concentrated in a single asset but cover multiple varieties such as PEPE, BONK, DOGE, FLOKI, MOG, spanning ETH and SOL ecosystems. This broad participation usually indicates that funds are reallocating at the sector level rather than engaging in short-term speculation on individual assets. Historical cycles also show that during Bitcoin’s sideways phase, high Beta assets tend to rebound first to test market risk appetite.

Leverage and sentiment: Bulls entering but leverage risks accumulating

The derivatives market for Meme coins is also heating up rapidly. Data from Coinglass shows that in the past 24 hours, open interest for DOGE increased by 45.41%, reaching $1.941 billion; PEPE grew by 33.32%, with open interest at $514 million; SHIB increased by 93.66%, WIF by 123.39%, PENGU by 69.04%.

Open interest is a core indicator used to judge whether “real money” is entering, as it reflects the total amount of unsettled derivatives contracts. Every seller’s trade has a buyer settlement. The current Meme coin price rebound is validated by the simultaneous increase in open interest and trading volume. Represented by PEPE and DOGE, many Meme coins see significant growth in derivatives volume alongside price increases. This synchronicity usually indicates a bullish market, as leveraged traders expect rising prices and open more contracts, showing genuine long positions rather than just short covering.

Of course, the rapid expansion of open interest also means leverage positions are accumulating. Given Meme coins’ limited fundamental support and high dependence on sentiment, active high-leverage platforms could significantly amplify short-term volatility. Historical experience shows Meme coins are often the “canary in the coal mine”: they react earliest to changes in risk appetite but are also most prone to rapid declines when sentiment reverses. If market sentiment shifts or external shocks occur, overly concentrated long positions could trigger quick deleveraging and chain liquidations. Therefore, while derivatives data confirms the current rebound, its structure also indicates short-term pullback risks should not be ignored.

Altcoins may follow Meme coins’ footsteps, potentially benefiting SOL

On-chain analysis platform Santiment previously posted on X that this Meme coin rebound started a few days after Christmas, when FUD sentiment among retail traders peaked. Historically, the assets most overlooked by retail investors tend to be the first to rebound in a market recovery.

As market funds begin to diversify into “other” sectors like Meme coins, altcoins may also soon see upward movement. Historically, the altcoin that benefited most from the Meme coin craze is SOL.

Meme coins have long been a major growth driver for Solana, boosting user activity and cultural influence over the past few years. This activity has helped attract developers and traders to the network and played a key role in Solana’s DeFi revival. 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 head of AI at True Trading, said that Meme coins have become part of Solana’s cultural identity and a liquidity engine attracting users. However, Solana’s next phase of growth may come from applications less reliant 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 trap?

Given that the current crypto market has not fully emerged from its slump, some skepticism remains within the community: Is this a prelude to a full recovery, or just an emotion-driven short-term rebound?

Optimists believe that Meme coin’s strong rebound indicates a return of risk appetite in the crypto market, potentially leading to a rally in altcoins and even mainstream assets. But on the other hand, features like social media-driven hype, leverage amplification, and prices far below all-time highs resemble 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 management.

What is certain is that Meme coins have already kicked off the first wave of the 2026 crypto market. Whether it will light the way for a new bull market or burn too brightly and backfire remains to be seen, and perhaps the answer will be revealed very soon.