The sentiment of meme coins has a magnifying effect on the cryptocurrency market. Although these tokens often lack fundamental support, the sentiment-driven and community-powered aspects significantly impact market sentiment in the following ways:
🧠 1. How meme coin sentiment affects the market
1. Boosting Risk-On Sentiment
When meme coins (like DOGE, SHIB, PEPE, WIF, etc.) soar, it often indicates increased risk appetite in the market, with investors willing to bet on high-risk assets, representing:
Market funds are abundant.
Investor confidence is strong.
Expectations for future market trends to continue rising.
📌Extended Impact:
May drive the rotation of overall small coins (Altcoins) and trigger Altseason.
2. Speculative Bubble and Overheating Warning
When meme coins experience excessive gains, phenomena like hundred-fold coins or zero fundamental coins being heavily speculated often signal that the market is approaching a short-term peak, which may result in:
Main players transfer risk by selling.
Retail investors FOMO into chasing highs.
Triggers overall market corrections or reversals.
📉For instance: After the surge of DOGE in 2021, the overall market soon entered a correction phase.
3. Community Effects and Narrative Shifts
Meme coins largely rely on community momentum (Reddit, Twitter, Telegram) and narrative creativity (such as dog culture, humorous memes), rather than technological innovation or practicality.
Small tokens can rapidly gain popularity through meme packaging.
KOL/influencer/Elon Musk tweets can instantly drive up coin prices.
Investors are more willing to hold coins due to a strong sense of participation.
4. Sentiment Transmission Effect
The market for meme coins often mirrors sentiment, for example:
DOGE/PEPE suddenly skyrocketed → the market believes 'money has returned' → BTC, ETH short-term follow-up.
Meme coin crash → market panic, selling pressure spreads to other small coins.
🔍 Case Review
Event Market Impact
DOGE surged in 2021 driven by Elon Musk’s tweets, igniting the meme coin craze, with most altcoins rising, forming a bubble structure.
PEPE, WIF became popular in 2024, attracting massive funds into meme coins, while BTC also rises, initiating a rotation market.
BONK surged in the Solana ecosystem, boosting the Solana ecosystem's popularity, with DeFi/NFT simultaneously active.
🎯 Conclusion: The 'Signal Value' of Meme Coin Sentiment
Indicator Positive Signal Negative Signal
Trading volume surges; market funds are active, risk appetite increases; speculative overheating, main players may sell.
Community frenzy (FOMO) Retail investors are eager to enter, mainstream coins may catch up This could be the last leg, so be cautious about exiting in batches.
Rapid rise in topics indicates that funds may rotate to other meme coins or small coins, creating opportunities for short-term trades. Overheated sentiment may backfire; observe if mainstream coins' movements lag or show reversal signals.
