From retail FUD peak to collective rebound: Meme coins fire the first shot of market reversal

Author: Ambcrypto, Cointelegraph

Translation: Moni

Original Title: The First Wave of Market in 2026 Turns Out to Be Meme Coins: Prelude to Revival? Bull Market Trap?

After experiencing the so-called “torment” of Q4 2025, the cryptocurrency market finally shows signs of recovery in early 2026.

Contrary to many expectations, it is not Bitcoin or Ethereum that ignites the crypto rally at the start of the new year, but Meme Coins. After a period of calm holidays and subdued market activity, Meme Coins are making a strong comeback.

Is the capital rotation cycle repeating?

Frankly, this Meme Coin rally is not abrupt. At the end of 2025, market liquidity dried up, FUD sentiment spread, and retail investors’ risk tolerance dropped to its lowest point of the year. Meme Coin market cap fell over 65%, dropping to $35 billion on December 19, hitting a new low for the year, with traders’ risk appetite waning. After Christmas, Bitcoin remained volatile, and mainstream assets lacked direction, causing funds to naturally shift toward more resilient high Beta assets, and Meme Coins just filled 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 $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 PEPE soared 64.81%.

Meanwhile, trading volume for Meme Coins also skyrocketed 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 rise in Meme Coins is not just a “pump” of a single token but a broad sector-wide rebound. At the same time, social media discussion heat and on-chain trading volume are expanding in tandem, indicating that attention and liquidity are flowing back, rather than just price increases.

Technical analysis: Meme Coin rebound is not baseless

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 “sell on rebound” to “buy the dip.”

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

Internally, the sector shows clear signs of systemic strength. The recent rally is not concentrated in a single asset but covers multiple tokens such as PEPE, BONK, DOGE, FLOKI, MOG, spanning both ETH and SOL ecosystems. This broad participation usually indicates sector-level allocation of funds rather than short-term speculation on individual assets. Historical cycles also show that during Bitcoin sideways trading, high Beta assets tend to rebound first to test market risk appetite.

Leverage and sentiment: Bulls entering but leverage risks accumulating

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

Open interest is a key indicator used to assess whether “real money” is entering, as it reflects the total amount of unsettled derivatives contracts—each seller’s trade has a buyer settling. 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 show significant growth in derivatives volume alongside price increases. This synchronicity generally indicates a bullish market, as leveraged traders open more contracts expecting higher prices, signaling genuine long positions rather than just short covering.

Of course, the rapid expansion of open interest also means leverage exposure is accumulating. Given Meme Coins’ limited fundamental support and high dependence on sentiment, active high-leverage platforms could amplify short-term volatility. Historically, Meme Coins often act as “canaries in the coal mine,” reflecting changes in risk appetite earliest but also being prone to sharp declines when sentiment reverses. If market sentiment shifts or external shocks occur, overly concentrated long positions could trigger rapid deleveraging and chain liquidations. While derivatives data currently validate the rebound, its structure also indicates short-term correction risks should not be ignored.

Altcoins may follow Meme Coin moves, potentially benefiting SOL

On-chain analytics platform Santiment previously posted on X that this Meme Coin rebound began 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.

As market funds begin to diversify into “other” sectors like Meme Coins, altcoins may soon see upward movements. Historically, the altcoin that benefits most from Meme Coin hype 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 the revival of Solana’s decentralized finance ecosystem. Meanwhile, the dominance of meme coin trading influences investor and institutional 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, 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 revival or a classic bull trap?

Given that the current crypto market has not fully emerged from its slump, some within the community question whether this Meme Coin craze is a prelude to a full recovery or just an emotion-driven short-term rebound.

Optimists believe that the strong rebound in Meme Coins indicates a return of risk appetite in the crypto market, with altcoins and even mainstream assets possibly rallying in succession. But on the other hand, features like social media hype, leverage amplification, and prices far below all-time highs seem highly reminiscent of 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 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, but the answer may be revealed very soon.