3 reasons why PEPE's 84% rally could quickly reverse

The PEPE price has decreased by approximately 3% over the past 24 hours, but the overall picture still shows a positive initial outlook. From the late December bottom, this token has increased nearly 84% and recorded a gain of about 62% over the past week, making PEPE one of the top-performing meme coins this week.

However, when expanding the scope of observation, caution is necessary. Over the past three months, PEPE has still declined about 32%, reflecting that the overall downtrend has not been completely eliminated. Although the recent rally has been very strong, some signals suggest this trend may not be sustainable. Here are three reasons why PEPE’s sharp price increase could quickly reverse.

Flag Pattern and EMA: Initial Positive Signal

On the 12-hour timeframe, PEPE’s price is forming a classic bull pole and flag pattern. A bull flag appears when the price rises sharply, then consolidates or slightly corrects before continuing the upward trend. This pattern often attracts trend-following traders, expecting the trend to continue.

Moving averages also reinforce optimism. The 50-period EMA ( reacts quickly to price fluctuations ) and is approaching the 100-period EMA. When the short-term EMA crosses above the long-term EMA, it is usually seen as a trend reversal signal.

PEPE Price Movement | Source: TradingView Therefore, buying pressure may emerge from traders expecting the correction to be a buying opportunity. The sideways movement of the price is viewed as a positive sign, not weakness.

However, this structure remains valid only if key support zones are maintained. If PEPE’s price stays above the $0.0000060 level, the flag pattern remains technically confirmed. Conversely, if this level is broken, the upward trend could quickly lose its solidity.

Whales Selling as Trading Activity Surges

Despite the technical chart signaling positivity, on-chain data tells a different story.

Since late December, PEPE whales have continuously reduced their holdings. On December 29, large holders controlled about 136.71 trillion PEPE, and this number has now decreased to 133.85 trillion — nearly 2.86 trillion tokens sold. At the current price, this sell-off is worth about $20 million distributed to the market.

Pepe whales are selling | Source: Santiment Notably, selling activity continues even as PEPE’s price rises, which is a warning sign. Sustainable rallies are usually supported by accumulation from whales, rather than continuous selling pressure.

Token movement data further supports this risk. The spent coins index ( tracking on-chain token movements ) surged after December 30, from about 419 billion PEPE to nearly 1.88 trillion PEPE, despite a slight dip in the first two days of January.

A sharp increase in token movement during a price rally is often a sign of distribution and profit-taking, rather than long-term accumulation.

Trading activity remains high | Source: Santiment In other words, supply is being actively released (for two reasons that make the rally fragile), rather than being locked in. This weakens the foundation of the price surge. At the same time, it raises the question: despite whale selling pressure, why is PEPE’s price still rising strongly?

Derivatives Market: Explaining the Rally and the Risk of a Deep Drop for PEPE

If whales are continuously selling, why does PEPE’s price still surge?

The answer may lie in the derivatives market — the third reason. On the 30-day liquidation map for PEPE perpetual futures contracts, long positions dominate overwhelmingly. Total long liquidation leverage is near $218 million, while short positions are only about $106 million, indicating that longs are twice as large as shorts.

This imbalance suggests that the rally is largely driven by short position liquidations and strong long positions, rather than genuine demand in the spot market. When many short positions are forced to close, PEPE’s price rises sharply.

PEPE Liquidation Map | Source: Coinglass However, this dynamic also carries significant risk. When long positions become too crowded, even a small correction can trigger forced selling, causing the price to fall rapidly. If PEPE loses a key support level, the long liquidation effect could spread, pushing the price down further.

This risk is especially notable at the current price level. PEPE is trying to hold above the $0.0000060 mark. If this level is broken, the next support zone is around $0.0000046, representing about a 30% decline from recent highs. With whale selling pressure and high token movement activity, the downward momentum could accelerate more than expected.

PEPE Price Analysis | Source: TradingView Conversely, if PEPE closes the 12-hour candle above $0.0000072, the bearish scenario will be invalidated.

In summary, PEPE’s impressive 84% rally is real, but the underlying signals are mixed. The chart structure indicates an uptrend, but whale distribution, increased token movement, and concentrated long positions suggest this rally carries significant risks and lacks stability.