Memecoins explode as 2026 begins – but the first cracks are showing

2026 kicked off with investors clearly chasing high risk.

Nothing illustrates this better than the memecoin market, which has seen a 20%+ rally so far, adding $10 billion in under two weeks. By comparison, the TOTAL3 index (market cap excluding BTC and ETH) jumped 6%.

This paints a clear picture of investor sentiment. The crypto index, which has hit a “neutral” zone, is aligning more with capital chasing meme assets rather than altcoins, reflecting strong speculative appetite among traders.

As a result, this shift in sentiment is showing up directly in price action. 

According to CoinMarketCap data, the weekly performance of top memecoins is averaging over 20%. Notably, Pepe [PEPE] is leading the pack with an eye-catching 50% weekly rally, making it a key asset to watch.

Why does this matter? LookonChain spotted a whale selling 129 billion PEPE, taking a $151k loss. With PEPE leading the cycle, this raises a key question: Is this capitulation an early warning sign of a flash crash?

Memecoin uptrend faces potential flash crash risk

Hard data makes it clear why a memecoin-heavy rally can be risky.

On the derivatives side, OnChain Lens spotted massive liquidations in Fartcoin [FARTCOIN] and Pump.fun [PUMP], with profits flipping into losses as the market dipped, pushing whales $747k underwater.

PEPE isn’t far behind. Its Open Interest (OI) has dropped about 36% in less than 72 hours, wiping out nearly $200 million. The result? A sharp 15% breakdown that has effectively erased all of its weekly gains.

In this context, the recent whale selling doesn’t appear to be a fluke. 

Looking closer, PEPE’s chart shows that the breakdown occurred as the memecoin tested an overhang resistance at $0.0000072, pushing it back toward pre-October crash levels, when it had peaked at $0.0000009.

Taken together, these signals indicate that FOMO is starting to cool off.

As a result, since PEPE has dominated the majority of memecoin flows in this cycle, any weakness here could ripple through the “broader market,” raising the risk of a crash that squeezes capital across other risk assets.

Final Thoughts

• PEPE and other top memecoins saw massive gains, but whale selling and liquidations suggest FOMO is cooling off.
• Since PEPE dominates memecoin flows, any further weakness could trigger a flash crash, impacting capital across other risk assets.