PEPE faces volatility risk as the threat of a "short squeeze" increases

The memecoin market is experiencing a clear downturn, with the total industry capitalization dropping by 48% over the past year and declining an additional 6.9% in the most recent month, according to data from CoinMarketCap. Meanwhile, a report from Glassnode shows that this sector only grew modestly by 2.2% over the past week — significantly less than the 4.6% increase seen in Decentralized Finance (DeFi) and Layer 2 sectors.

Among memecoins, PEPE stands out as a typical example of the market’s weakening trend. At the time of writing, both short-term and long-term charts reflect a clear downward trend, with the local bottom of $0.00000336 still being tested.

Additionally, the open interest index is gradually shrinking amid continuous price declines, indicating that speculators are becoming more cautious and are not yet ready to bet on a recovery. As Bitcoin drops below the $70,000 mark, selling pressure could continue to weigh on PEPE, forcing holders of this memecoin to prepare for potential market volatility in the near future.

Possibility of a “short squeeze” in the coming weeks

Source: CoinGlass Similar to Bitcoin, PEPE is currently facing a dense cluster of short position liquidations above. Data from the 90-day liquidation map shows that the total leverage of short positions far exceeds that of long positions in the market.

This suggests that if the price begins to rise, a wave of short position liquidations could occur much more strongly than the number of long positions being “wiped out” during a price decline of the same magnitude. This scenario opens a notable opportunity for traders who prefer contrarian strategies. However, rushing into the market still carries significant risks.

In this context, Bitcoin’s movement remains crucial. The largest coin in the market could retreat to around $65,300 in the coming days. Whether Bitcoin maintains the support zone of $63,000–$65,000 or continues to slide deeper to $60,000 or lower could be a decisive factor for PEPE’s next trend.

Action plan for traders: Wait and see

Currently, Pepe Coin (PEPE) has not yet entered an attractive price zone for swing traders. As of now, this memecoin is hovering just below the long-term support level of $0.00000342. If the downtrend continues, the price could fall further to $0.00000303. Conversely, a short-term rebound could bring PEPE back to test the local peak around $0.00000379.

PEPE/USDT 4-hour chart | Source: TradingView However, determining which scenario has a higher probability remains quite difficult, as PEPE’s volatility often closely follows Bitcoin’s movements. Currently, BTC still has the potential to weaken further in the upcoming sessions, which could exert additional downward pressure on memecoins.

Nevertheless, swing traders should closely monitor the $0.0000038 level, as this remains a potential target if strong buying interest emerges. History shows that memecoins often experience rapid acceleration before entering deep correction phases. A notable example is the sharp rise in mid-February, when PEPE surged to $0.000005 — a time when many investors believed the downtrend had been broken, only for the market to reverse and correct afterward.