Meme Coins and Market Psychology: Assessing the Sustainability of DOGE and PEPE's Price Momentum

The meme coin sector has long been a playground for speculative fervor, but in 2025, tokens like Dogecoin (DOGE) and Pepe (PEPE) are drawing renewed attention from both retail and institutional investors. While DOGE's price has surged on the back of institutional accumulation and regulatory milestones, PEPE's meteoric rise has been fueled by whale activity and exchange listings. Yet, beneath these surface-level gains lies a deeper question: Are these price movements sustainable, or are they symptomatic of a speculative bubble driven by behavioral biases and social media hype?

Behavioral Finance and the Meme Coin Bubble

Academic research underscores the role of behavioral finance in cryptocurrency markets, particularly for meme coins. A 2022 study in Finance Research Letters found that meme coins and stocks exhibit "price explosivity"-sharp, irrational surges driven by coordinated social media activity and echo chamber effects (Bubbles across Meme Stocks and Cryptocurrencies). This phenomenon is amplified by psychological biases such as FOMO (fear of missing out), confirmation bias, and narrative economics, where viral internet figures or celebrity endorsements become self-fulfilling prophecies, according to The Meme Coin Renaissance. For instance, DOGE's recent price action has been buoyed by anticipation of a US ETF launch, a narrative that has galvanized retail investors and institutional players alike, as The Meme Coin Renaissance notes.

Meanwhile, PEPE's surge past an $11 billion market cap reflects the same dynamics. Whale purchases, such as a $1.58 million buy-in, signal confidence, but technical indicators like a potential double-top pattern and rising negative funding rates on platforms like Crypto.com suggest looming sell pressure, as discussed in The Paradox of Meme Coins. This duality-optimism versus bearish signals-mirrors the classic speculative bubble lifecycle, where early-stage euphoria gives way to profit-taking and correction, a pattern explored in Speculative Bubbles and Behavioral Economics.

Market Momentum: DOGE's Institutional Tailwinds vs. PEPE's Retail Hype

Dogecoin's price of $0.2409 in September 2025 is underpinned by institutional demand. Over 2 billion DOGE tokens were accumulated in August alone, a trend analysts attribute to ETF anticipation, a point highlighted in The Meme Coin Renaissance. Institutional involvement often lends credibility to assets, but it also introduces risks of sudden liquidity shifts if large holders reverse course. In contrast, PEPE's momentum is more retail-driven. Its 24-hour trading volume of $11.98 billion-surpassing Shiba Inu (SHIB)-reflects a frenzy of small-scale investors chasing meme-driven narratives, as the Paradox of Meme Coins argues. However, this retail-centric model is inherently fragile, as sentiment can pivot rapidly in response to market news or regulatory scrutiny.

Sustainability: DeFi Integration and the Illusion of Utility

Meme coins are increasingly integrating with DeFi mechanisms, such as staking and liquidity pools, to add utility. For example, platforms like Mutuum Finance allow DOGE holders to use their tokens as collateral for loans, as noted in Bubbles across Meme Stocks and Cryptocurrencies. Similarly, Solana-based meme coins like BONK and WIF benefit from the network's low fees, enabling rapid trading, a dynamic covered in DeFi vs Meme Coins. While these developments suggest a maturation of the meme coin ecosystem, they do not eliminate the core issue of volatility. As the Paradox of Meme Coins study notes, meme coins remain "speculative assets with limited utility," their value often decoupled from traditional financial fundamentals.

The Bubble Rupture: When Will the Hype Fade?

Historical patterns indicate that speculative bubbles in meme coins tend to burst when social media momentum wanes or when regulatory clarity emerges. For DOGE, the ETF launch could either solidify its status as a "serious" asset or expose its lack of intrinsic value if the product underperforms. PEPE, meanwhile, faces bearish technical signals and a shift in retail sentiment toward newer memecoins with perceived utility, a transition examined in Speculative Bubbles and Behavioral Economics. Behavioral economics suggests that investors will likely overreact to these triggers, exacerbating price swings, as the same analysis explains.

Conclusion: Navigating the Meme Coin Maze

The sustainability of DOGE and PEPE's price momentum hinges on balancing behavioral drivers with structural factors. While institutional adoption and DeFi integration offer some resilience, the inherent volatility of meme coins-rooted in social media sentiment and speculative trading-remains a wildcard. Investors must weigh the allure of viral narratives against the risks of a potential bubble rupture. As the adage goes, "This time it's different"-but history suggests otherwise.