Memecoin leads the rebound, is it the prelude to a bull market or a trap set by whales?

Author: Oluwapelumi Adejumo

Compiled by: Chopper, Foresight News

As the prices of tokens like PEPE and SHIB soar, the total market capitalization of Memecoin surpasses $50 billion, reigniting market speculation frenzy.

After a full year of continuous decline, a core indicator measuring Memecoin’s share in the altcoin market, the “Memecoin Dominance,” has rebounded strongly from its historical lows. The total market cap of Memecoin has returned to the $500 billion mark, with tokens like PEPE, BONK, and FLOKI recording double-digit gains at the start of the year.

This surge forces institutional fund managers and retail traders to confront a key question: Is this merely a short-lived spike in post-holiday speculation, or an early sign of a comprehensive market style shift?

Data from market intelligence firm CryptoQuant highlights the intensity of this change. After reaching a peak in “Memecoin Frenzy” in November 2024, the dominance of this sector in the altcoin market entered a prolonged downward trend.

Memecoin Market Dominance, data source: CryptoQuant

At its peak, Memecoin accounted for 11% of the total altcoin market cap, with a dominance ratio of 0.11. By December 2025, this figure plummeted to just 0.032, touching a historical bottom.

However, analysts point out that the last time this indicator hit such a low, it was followed by a large influx of speculative liquidity, ultimately driving the entire altcoin sector higher.

Today, speculative investors are viewing this bottoming rebound as a potential leading indicator.

If this trend continues, it suggests that market risk appetite is recovering faster than expected, potentially heralding a new altcoin bull market and having profound implications for blockchain activity and token listing standards throughout 2026.

Key signals amid the noise

Data from analytics platform Santiment shows that in the first week of the year, the overall market cap of Memecoin surged over 20.8%, with the sector’s total value surpassing $45.3 billion.

Meanwhile, crypto market data site CoinGecko estimates an even higher valuation, calculating that the “Memecoin Economy,” which includes dog-themed, frog-themed, and politically satirical tokens, has reached approximately $51.6 billion.

Leading this rebound are the veteran tokens that dominated previous bull markets. Over the past seven days, PEPE and the self-deprecatingly named USELESS tokens both gained 54%; MOG tokens rose 38%; and BONK on the Solana chain also saw a 34% increase. Even veteran assets like Dogecoin and Shiba Inu are not lagging, with Sunday trading volumes reigniting, and Shiba Inu surging 13% in a single day.

Santiment analysts attribute this rebound timing to a classic contrarian investment signal. The rally began shortly after Christmas, precisely when retail traders’ FUD (Fear, Uncertainty, Doubt) towards speculative assets peaked.

Memecoin leading crypto market rebound, data source: Santiment

When market sentiment hits rock bottom and ordinary traders turn bearish and exit, savvy capital chooses to go against the trend, seizing the panic-selling opportunity to accumulate at low prices.

For fund managers shifting their asset allocation to “quality tokens” in 2025, the resurgence of Memecoin presents a dilemma.

This market movement tests the entire industry’s willingness to embrace leverage trading again: ignoring this rebound might mean missing the first phase of a risk appetite cycle; chasing the rally, however, would mean re-entering the most volatile segment of the crypto market.

ETF’s role in boosting

Unlike previous Memecoin bull markets driven almost entirely by overseas exchanges and decentralized platforms, the 2026 rebound also carries a regulatory compliance aspect.

The approval and listing of several complex US crypto ETFs have opened new channels for speculation, allowing it to penetrate traditional brokerage accounts.

Bloomberg Intelligence ETF analyst Eric Balchunas points out that some of the best-performing funds at the start of the year are leveraged Memecoin ETFs.

Among them, the 21Shares 2x Long Dogecoin ETF (TXXD) has performed particularly well, indicating that market demand for Memecoin investments is no longer limited to crypto-native traders using on-chain wallets.

21Shares Dogecoin ETF leads the market, data source: Eric Balchunas

The institutionalization of the “Memecoin Economy” has fundamentally changed its influence on the broader crypto market. When billions of dollars flow into Memecoin-related assets, the ripple effects will extend outward.

This will influence the listing decisions of major centralized exchanges, which rely on high-volume tokens’ trading fees to subsidize other operations; it will also push asset management firms to expand their product lines.

Once this $50 billion asset class begins to dominate market cycles, the entire crypto infrastructure will be forced to adapt to the liquidity demands of these “flash-in-the-pan joke tokens” once considered insignificant.

Meanwhile, the internal landscape of the Memecoin sector continues to diversify. Data from CoinGecko divides the $51.6 billion Memecoin market into multiple segments, revealing a complex hierarchical structure.

“Boy’s Club” and “Frog-themed Coins” currently hold 10.9% and 10.7% of the Memecoin market share respectively, challenging the long-standing dominance of “Dog-themed Coins” (about 6.1% market share).

Memecoin segmentation market share, data source: CoinGecko

Emerging categories like “Political Finance Coins” and “AI Memecoin” have also amassed market sizes in the billions, indicating that the Memecoin sector is forming its own internal rotation pattern.

Layer-1 Ecosystem Battles Resume

The resurgence of Memecoin also serves as a stress test and growth engine for underlying blockchain networks, notably Solana and Coinbase’s Layer 2 network Base.

In the Solana ecosystem, activity on Memecoin Launchpad has risen to a three-month high. Daily trading volume, new token launches, and the “Daily Token Graduation” count—tokens that gain enough popularity and successfully migrate from launch platforms to decentralized exchanges—have all surged significantly.

Solana Memecoin Launchpad platform trading volume, data source: Blockworks Research

This active trend rekindles the “Fee War” debate—different blockchains competing to become the preferred venue for high-frequency speculative trading.

Last year, platforms like Pump.fun and LetsBonk contributed substantial revenue to the Solana network; early 2026 data shows this trend is accelerating again.

This market dynamic has also sparked industry leaders’ discussions, who believe the significance of the Memecoin phenomenon extends beyond mere speculation.

Jesse Pollak, chief developer of the Base network, states that such assets have practical functions in the crypto economy. He defines Memecoin as “a community collaboration anchor,” capable of rallying people and creating scenarios for collective activities.

“We need more Memecoins because we need more creativity, community vitality, and collective action,” Pollak said. He views Memecoin as a traffic entry mechanism that attracts users, who eventually turn to other on-chain applications.

For the blockchain networks themselves, this Memecoin craze has tangible effects: sustained rallies will boost demand for native tokens, test network throughput, and attract more liquidity providers.

Centralization Paradox

Although the Memecoin narrative always revolves around “community governance” and “decentralized fun,” existing data reveal a major risk related to holdings concentration.

On the surface, the current rally appears broad-based, but ownership of top tokens is highly concentrated.

CryptoQuant data shows that Shiba Inu, one of the leading Memecoins, is controlled by nearly 63% of its total supply across 10 wallets. The largest single wallet holds about 41% of the supply, worth approximately $3.3 billion.

This highly concentrated ownership structure is not unique to Shiba Inu; many popular tokens in sectors like “Solana Memecoin” and “Frog-themed Coins” show similar distribution patterns.

This poses significant hidden risks for retail investors entering later: with liquidity concentrated in a few “whale” wallets, the market faces the risk of sudden dumps.

CryptoQuant analysts warn that although current market signals resemble those before previous bull markets, “it is still too early to assert whether this trend will continue.”

For speculative investors, this is a classic high-risk, high-reward moment. The rebound of Memecoin dominance from historic lows indicates the market is awakening, but the highly concentrated holdings and leverage-driven nature of the rally still threaten the sector’s fundamental stability.