Risk on, BONK out? Is PEPE gearing up to lead the next cycle?

Key Takeaways

• PEPE underperformance has been in sharp contrast to BONK’s, with the latter leading the market’s legacy memecoins. It’s being driven by Bonk.fun-fueled momentum. However, with risk appetite returning, is capital rotation about to flip the setup?

After weeks of range-bound chop, the memecoin market has snapped back to life. At press time, it had reclaimed the $60 billion market cap, rising by 7.10% with the 24-hour volume up by nearly 80%.

In fact, BONK has emerged as the clear outlier among legacy memecoins, posting 30% monthly gains. On the contrary, peers like PEPE might be lagging behind.

Does this divergence have staying power though? If risk appetite sticks, could PEPE be gearing up for a relative breakout, ready to ride the next wave of capital rotation into memecoins?

BONK breaks out, PEPE eyes a comeback

The late June to early July leg may have marked BONK’s most structurally sound rally since the election pump. 

The memecoin posted a near 90% move off the $0.00001278-low, clearing three key resistance levels with sustained volume. In contrast, PEPE managed a 30% bounce from its $0.00000830 base.

This divergence also played out on the BTC pairs – BONK/BTC broke through its month-long resistance zone, while PEPE/BTC continued to compress below a declining trendline.

Source: TradingView (BONK/BTC)

Crucially though, this divergence wasn’t a fluke. Instead, it reflected a real shift in BONK’s on-chain momentum.

In late June, daily active addresses tied to BONK surged by over 180%, with new wallet creation up 140% week-over-week. BONK.fun mints spiked, briefly flipping Pump.fun in daily volume.

Consequently, while BONK rallied by 30%, PEPE dropped by 16% in the same window, failing to attract risk-on flows. However, with BONK now stalling at BTC-pair resistance, can PEPE capitalize to absorb the next rotation?

Memecoins recalibrate as risk sentiment flips bullish

With the memecoin market turning risk-on, capital rotation has been picking up pace. 

With Bitcoin [BTC] breaking into price discovery, traders are now cycling into high-beta plays, chasing asymmetric upside. 

PEPE is starting to front-run this rotation. It posted an 11% move in under 72 hours. Meanwhile, BONK retraced by nearly 8% after tagging the $0.000023 supply wall – A level where realized profits surged to a five-month high of $11.7 million. 

Source: Glassnode

On the other hand, PEPE kicked off July with nearly 10k new addresses, pushing total holders to an all-time high of 11.42 million.

In fact, this on-chain expansion aligned with a clean breakout above the $0.000010-level, while PEPE/BTC printed a bullish reversal.

Therefore, with BONK fading off its supply wall and risk capital rotating back into high-beta meme plays, PEPE may technically be primed to lead the next momentum cycle.