The Rise of PEPE: Why an 84% Increase Could Collapse Instantly

PEPE has fallen approximately 3% in the past 24 hours, but from a broader time perspective, the token’s performance still warrants cautious evaluation. Since the low point at the end of December, PEPE has accumulated an 84% increase, with a nearly 62% rise over the past week, making it quite competitive among mainstream tokens this week. However, a closer look reveals an issue that cannot be ignored: over the past three months, PEPE has declined by 32%, indicating that the broader downtrend has not fully dissipated. Despite the recent strong upward momentum, multiple warning signals point to hidden risks in this rally.

Technical Pattern Traps: Seemingly Solid Support May Be Fragile

On the 12-hour chart, PEPE is forming a classic bull flag pattern. This pattern typically appears after a sharp price increase and is followed by sideways movement or a slight correction. For traders seeking to continue the rally, this correction is often interpreted as a positive sign—a “healthy correction” rather than a trend reversal.

The 50-period exponential moving average (EMA) is gradually approaching the 100-period EMA. When a shorter-term moving average crosses above a longer-term one, technical analysts usually see this as a bullish confirmation. This crossover has indeed sparked further buying interest, with many traders even hoping this correction will provide a better entry point.

However, the effectiveness of this technical setup relies on a critical premise: key support levels must continue to hold. Currently, PEPE is hovering around $0.0000060, which has become the lifeline of the entire bull flag pattern. If this level is broken, the seemingly perfect technical configuration will quickly invalidate, with the next clear support zone at $0.0000046, implying a potential drop of about 30% from the current high.

On-Chain Data Sound the Alarm: Whales Reducing Positions at High Levels

Despite the optimistic signals from the chart, on-chain behavior tells a different story. Major holders of PEPE have been steadily reducing their holdings since late December. As of December 29, large holders controlled approximately 136.71 trillion tokens. Now, this number has shrunk to 133.85 trillion, a reduction of about 2.86 trillion tokens. At current prices, this reduction amounts to nearly $20 million.

More concerning is that this selling activity has not stopped despite the price rising—in fact, it has continued, which is rare in a healthy upward trend. Typically, a strong and sustainable rally is accompanied by increased accumulation and holding by large investors, not by reductions.

On-chain activity indicators further confirm this unease. Metrics tracking transfer activity show that since December 30, token liquidity has surged significantly—from about 419 billion tokens to nearly 1.88 trillion tokens. Although there was some pullback between January 3 and 4, the overall trend remains clear. This surge in activity often corresponds to profit-taking and distribution of chips, rather than long-term accumulation. In conservative terms, the market supply side has become more active and impatient, which undoubtedly weakens the foundation for a sustained rally.

Derivatives Market: Hidden Bubbles and Risk Sources

If asked why PEPE’s price can still rise strongly amid whale reductions, the likely answer points to the derivatives market. This becomes the third key risk factor.

In the 30-day perpetual contract liquidation heatmap, long positions appear severely overleveraged. The total long leverage exposure approaches $218 million, while short liquidation exposure is only about $106 million. This indicates that long positions are nearly twice the size of shorts, reflecting that the upward movement is mainly driven by forced liquidations—large short positions being closed—rather than organic demand from fundamentals.

This imbalance has now evolved into a Damocles sword hanging over the market. When long positions are excessively piled up, any minor price adjustment could trigger a chain reaction of liquidations. If PEPE breaks below key support, forced liquidations of longs could cause a cascade of selling, accelerating the decline far faster than market expectations.

This risk is especially urgent at the current price level. PEPE is struggling to hold at the support level of $0.0000060. If this line is broken, the subsequent correction could reach 30% or more. Considering whale reductions and abnormal on-chain activity, such a collapse could happen faster than anticipated.

Key Turning Point

The only condition that can change the situation is: a 12-hour closing price above $0.0000072. Achieving this target can effectively neutralize the current bearish momentum.

Overall Assessment

PEPE’s 84% increase is impressive, but the fundamental signals do not support such a one-sided optimism. While the technical chart shows constructive signs, the quiet withdrawal of whales, abnormal surge in on-chain activity, and severe long leverage in the derivatives market all point to a deeper instability. This is not a sign of strength but a warning of a fragile structure. For participants, staying vigilant is wiser than blindly chasing highs.