PEPE Faces 49% Drop Risk as Traders Divide on Direction

PEPE, a memecoin, has recently hit the upper band of the Bollinger Bands it has been trading within, indicating a potential for significant selling pressure. Over the past 24 hours, PEPE experienced a minimal loss of 1.06%, with spot traders accumulating the asset while derivatives traders focused on selling, as evidenced by the rise in short contracts across the market.

Historically, when PEPE has reached this upper band level, it has recorded major price drops. In the last three instances, the asset lost 49%, 28%, and 46% of its value. If this trend repeats, PEPE could see a significant decline, potentially leading to a double-digit percentage drop and returning to trading below its descending line, a level it previously breached.

When the price crosses above this descending line, it typically signals the start of a rally. However, in this case, the price has been moving sluggishly, struggling to establish a rally, indicating that a decline is still possible. Derivatives and spot traders remain divided on the altcoin’s next price direction, with derivatives traders betting on a price decline and spot traders accumulating despite the dip.

In the derivatives market, Open Interest and Volume fell by 1.65% and 39.46%, respectively, indicating that the market is currently dominated by short traders and that momentum is weakening. At the time of writing, the value of unsettled contracts in the market stood at $233.96 million. This downward pressure from derivatives short traders could play a significant role in keeping PEPE’s price low or driving it even lower.

However, spot traders are taking a different approach by accumulating PEPE. In the last 24 hours, this cohort has purchased $4.4 million worth of the asset, preventing further price depreciation. A significant purchase from the spot market typically hints at strong bullish conviction, which could absorb selling pressure and lead to a price rebound on the charts.

Analyzing other technical indicators, ongoing accumulation and liquidity inflows into the asset suggest a rally may be on the horizon. The Accumulation/Distribution indicator’s reading was positive, implying that the market has been in an accumulation phase. The Money Flow Index (MFI), which tracks liquidity inflows and outflows over a specific period, confirmed that liquidity is flowing into PEPE, further confirming the presence of buyers in the market.

At this juncture, PEPE could defy its historical bearish trend and establish a new high, particularly as spot traders continue accumulating. The market remains divided, with some participants aligned with a drop while the market maintains its bullish structure. Two technical indicators suggest that the bulls may overturn the bears and gain momentum, but the overall trend remains uncertain.