Pepe (PEPE) experienced a significant price increase on May 27, driven by the recent approval of key Ether (ETH) exchange-traded fund (ETF) filings in the U.S. This prompted traders to see Ethereum-based memecoins as high-risk, high-reward opportunities.
PEPE’s price soared by 7.60%, reaching an all-time high of $0.00001725. This represents an impressive 88% surge since the U.S. Securities and Exchange Commission (SEC) approved the Ether ETF filings on May 20.
Following the approval of the ETF filings, other Ethereum-based memecoins such as Dogecoin (DOGE), Shiba Inu (SHIB), and Mog Coin (MOG) also experienced significant gains.
A closer look at the PEPE market suggests that the ongoing rally may soon come to an end. This is due to a growing divergence between the rising prices and falling daily relative strength index (RSI). This “bearish divergence” indicates that the upward momentum may be weaker than the price action suggests, potentially signaling a price reversal. A similar situation occurred in January when memecoins experienced a 40% crash after a noticeable divergence between increasing prices and declining RSI trends.
Additionally, PEPE’s daily RSI has already crossed over 70, entering the overbought territory. This typically precedes a period of price correction or consolidation, further increasing the risk of a sell-off in the PEPE market after its strong performance over the past year.
In the event of a correction, PEPE’s price could potentially fall towards its 50-day exponential moving average (50-day EMA) at around $0.00000965 by June, representing a 40% drop from the current price levels. Conversely, if the uptrend continues, PEPE may test its 2.618 Fibonacci retracement level near $0.00002203, indicating a potential 32% increase from the current price levels.
The bearish technical outlook for PEPE is reinforced by the profit-taking activities of its wealthiest investors. The supply of PEPE held by entities with balances exceeding 1 billion tokens has decreased during the market uptrend, indicating that these “whales” have been selling at local price peaks. On the other hand, the supply of PEPE held by smaller investors has increased.
However, there have been cases where individual traders have withdrawn millions of dollars worth of PEPE tokens from exchanges after the recent price surge, indicating their intention to hold onto the memecoin instead of selling it at its current highs.
The impact of these withdrawals on the overall whale supply data is yet to be seen, which further adds to the correction risks for PEPE in June.
It’s important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.