Meme takes off first, will this time be different?

Written by: Seed.eth

After nearly two weeks of stagnant holiday market conditions, the crypto market has shown a clear rebound on the second trading day of 2026.

On January 2nd, Bitcoin briefly rose above $90,700, with an intraday increase of about 2%; Ethereum gained over 4%, surpassing the $3,100 mark.

Meanwhile, the meme coin sector collectively strengthened: PEPE surged over 30% during the day, with established meme coins like DOGE and FLOKI rebounding in tandem, driving a noticeable increase in market risk appetite.

CoinMarketCap data shows that as of that day, the total market capitalization of all crypto assets was approximately $3.07 trillion, up about 2.33% in 24 hours; total market trading volume rebounded to over $120 billion. Structurally, Bitcoin’s market share was about 57%, Ethereum about 11.9%, with mainstream assets still dominating, but high-elasticity sectors have already started to lead the way.

A Typical “Risk Appetite Test”

Meme coins leading the rally in this cycle are not an isolated event but the result of the combined effects of market phases, capital behavior, and narrative mechanisms. From a higher dimension, the current crypto market is still in a transitional phase before trend confirmation:

• Bitcoin and Ethereum are experiencing mild rebounds but have not yet broken through key structural levels;
• Altcoins are mainly recovering collectively, with no systemic rotation observed;
• Trading volume has increased but remains below the levels seen at the early stages of previous bull markets.

At this stage, capital prefers to test risk appetite with smaller costs rather than make long-term bets on “slow variable” assets.

Meme coins possess this structural advantage precisely: high elasticity, quick feedback, low fundamental requirements, making them the most sensitive price carriers to changes in risk sentiment.

The Role of Meme: “Risk Thermometer”

In the crypto market, meme coins have long played a role similar to “high-volatility options”:

• Strong leverage of unit capital on price movements
• Gains driven more by sentiment and flow
• Trends can form without fundamental improvements

Therefore, when the market shifts from “extreme defense” to “cautious offense,” meme coins are often the first assets to be bought.

On-chain data also confirms this. According to CryptoQuant statistics, despite recent significant gains, meme coins’ market share within the overall altcoin market remains at a historical low, without the structural expansion seen in previous meme seasons.

Year-End Effect and Tax Factors Amplify Short-Term Buying

From a timing perspective, this rally occurred on the second trading day of the new tax year in North America, showing clear seasonal characteristics.

Several market participants pointed out that at the end of 2025, many US investors sold loss-making assets through tax-loss harvesting to offset taxes. After entering 2026, optimistic funds quickly replenished positions, and meme coins, due to their deep declines, decent liquidity, and high volatility, became the preferred choice.

CoinGecko data shows that PEPE’s 24-hour trading volume exceeded $1 billion that day, reflecting a clear concentrated replenishment pattern.

KOL Statements Accelerate the Rally

Unlike other sectors, the pricing mechanism of meme coins heavily depends on KOL sentiment.

Famous trader James Wynn from Hyperliquid issued a prophecy for 2026, stating that PEPE’s market cap could surge from the current $2 billion to $69 billion, drawing a comparison with the previous cycle’s SHIB (whose market cap rose from $350 million to $410 billion). Wynn’s vow of “delete account if not met” greatly stoked community sentiment.

Can It Continue? Analysts: It’s a Signal, But Not the Answer

Despite the impressive performance of meme coins, from a higher time frame, the market remains cautious.

CryptoQuant charts show that meme coins’ “dominance” within the altcoin market remains near the lows seen since 2022, with no trend-based upward movement. This indicates that retail speculative enthusiasm has not yet returned systematically.

Jake Kennis, senior research analyst at Nansen, pointed out:

“This round of capital rotation into large meme coins at the beginning of the year is more like a position adjustment after a long consolidation. To confirm a trend reversal, structural confirmation needs to be seen on higher timeframes.”

Kennis also emphasized that PEPE and DOGE are still about 80% below their historical highs, and the current rebound is more of a technical correction.

Overall, institutional views tend to be cautiously optimistic.

Neil Staunton, CEO of Superset, believes that the market has speculative expectations about a potential memecoin ETF in 2026:

“Even just the discussion of an ETF is enough to psychologically create a narrative: ‘If it might be packaged by institutions, does that mean it’s an investable asset?’”

However, he also pointed out that such expectations mainly influence sentiment and valuation anchors, not the long-term trend.

Some analysts also warn that historically, meme coins tend to be the fastest-rising sectors but also the earliest to correct. If Bitcoin cannot sustain structural strength, the rally in risk assets could quickly cool down.

Based on market performance, on-chain data, and analyst opinions, the core signal from this meme coin rally is not “bull market has arrived,” but rather:

The market may be emerging from an extremely pessimistic phase and beginning to re-engage with risk.

The rebound of meme coins is more like an early test of risk appetite return. What truly determines how far the market can go remains the trend of Bitcoin, continuous improvement in liquidity, and broader sector rotation. Until these conditions are clear, meme coins are still signals, not answers.