When the market enters extreme panic: Why will the first wave of the 2026 bull run be Meme coins?

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

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, it is not Bitcoin or Ethereum that ignited the crypto rally at the start of the new year, 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?
Honestly, this 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%, dropping to $35 billion on December 19, hitting a new annual low, with traders’ risk appetite waning. After Christmas, Bitcoin remained volatile, and mainstream assets lacked direction, causing funds to naturally shift toward more flexible high Beta targets, and Meme coins just filled this gap.
Data from CoinMarketCap shows that the overall Meme coin market cap has surpassed $47.7 billion, an increase of nearly $10 billion from $38 billion on December 29, 2025. Among the top three Meme coins by market cap, DOGE surged nearly 20% in a week, SHIB increased 18.37%, and PEPEPE rose 64.81%.

Meanwhile, Meme coin trading volume also soared 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 rise is not just a “pump” of a single token but a broad sector-wide rebound involving multiple assets. At the same time, social media discussion heat and on-chain transaction volume are expanding simultaneously, indicating that attention and liquidity are flowing back, rather than just a price surge.
Technical analysis: Meme coin rebound is not baseless
Meme coins are among the highest-risk cryptocurrencies. When their prices rebound, it may indicate that investors are willing to take on higher risks again. From a macro technical structure, 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 “buying on dips.”

Currently, TOTAL3 is testing a key resistance level 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 rebound of competing 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 sideways trading phases, high Beta assets tend to rebound first to test market risk appetite.
Leverage and sentiment: Bulls entering but leverage risks accumulating
The derivative market for Meme coins is also heating up rapidly. Data from Coinglass shows that in the past 24 hours, open interest for DOGE contracts increased by 45.41%, reaching $1.941 billion; PEPE grew by 33.32%, with holdings at $514 million; SHIB increased by 93.66%, and WIF9% grew by 126%, PENGU.

Open interest is a core indicator used to judge whether “real money” is entering, as it reflects the total amount of unsettled derivative contracts, with each seller transaction settled by a buyer. 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 derivative trading volume alongside price increases. This synchronicity usually indicates a bullish market sentiment, as leveraged traders expect rising prices to open more contracts, showing genuine long positions rather than just short covering.
Of course, the rapid expansion of open interest also means that leverage exposure is accumulating. Given the limited fundamentals supporting Meme assets and their high dependence 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”: they reflect changes in risk appetite earliest 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, although derivatives data confirms the current rebound, its structure also indicates short-term correction risks should not be ignored.
The upward trend of competing coins may follow Meme coins, potentially benefiting SOL
On-chain analysis platform Santiment previously posted on X that the current Meme coin rebound started a few days after Christmas, when FUD sentiment among retail traders peaked. Historically, the assets most underestimated 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, competing coins may also soon see upward movement. Historically, the biggest beneficiaries from the Meme coin craze are SOL.
Meme coins have long been a major growth engine 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 key role in the resurgence of Solana’s decentralized finance ecosystem. At the same time, 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, stated that Meme coins have become part of Solana’s cultural identity and a liquidity engine to attract users. However, Solana’s next phase of 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 trap?
Given that the crypto market has not yet fully emerged from its slump, there is some skepticism within the community about this Meme coin wave: is it a prelude to a full recovery or just a short-term emotional 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 competing coins and even mainstream assets. But on the other hand, features like social media-driven hype, leverage amplification, and prices well below historical highs seem highly similar to past “bull trap” scenarios. 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 illuminate a new bull market or burn too brightly and backfire remains to be seen—perhaps the answer will be revealed very soon.