The memecoin sector experienced significant declines, with its total market capitalization dropping 48% over the past year and 6.9% in a month, according to CoinMarketCap. PEPE, a prominent memecoin, faces particular pressure as bearish charts threaten its $0.00000336 local lows. Analysts suggest a potential short squeeze could occur, but traders are advised to wait, as PEPE’s direction is heavily dependent on Bitcoin’s price movements.
The memecoin market’s collective capitalization has fallen sharply, displaying weakness compared to other sectors. According to CoinMarketCap data, the sector declined 48% over the last year and 6.9% over the past month. Glassnode figures show memecoins gained only 2.2% last week, while DeFi and L2 sectors saw 4.6% growth.
Among memecoins, PEPE stands out as a notable underperformer. Its short-term and long-term charts are bearish, putting its $0.00000336 local lows under pressure once again. Open Interest was declining as prices fell, indicating speculators were not betting on a recovery.
The decline coincided with Bitcoin‘s price falling below $70,000, suggesting further drawdown for PEPE holders could follow. However, a short squeeze could materialize in the coming weeks. The 90-day liquidation map showed cumulative short liquidation leverage was much higher than long liquidation leverage.
A price move higher would liquidate many more short positions than a similar move down would wipe out longs. This presents an attractive prospect for counter-trend traders, but they should not be in a hurry. Bitcoin has a chance of dropping to $65,300 in the coming days.
Whether Bitcoin defends the $63,000-$65,000 area or falls to $60,000 will decide PEPE’s likely direction. At press time, PEPE was just below the long-term support at $0.00000342. The downtrend could see it fall to the $0.00000303 extension level or bounce to the $0.00000379 local highs.
It is hard to tell which is more likely because PEPE will closely follow Bitcoin trends. As things stand, BTC looks poised for more downside over the weekend. Swing traders should remember the magnetic zones above $0.0000038 are a valid target.
Memecoins tend to rally quickly before retracing the move, like the mid-February rally to $0.000005 that appeared to break the downtrend but didn’t. The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.
