The recent drop in PEPE price has led to a wave of liquidations by traders holding long positions in the meme coin futures market. Over the past three days, over $7 million in long positions have been liquidated, indicating significant losses for bullish traders.
If the downtrend continues in the short term, long PEPE holders may face further losses. Here's why.
PEPE's Crashing Price Leads to $7.7 Million in Liquidations
The price of PEPE has been steadily declining over the past few days. The meme coin is trading at $0.000017 at press time, having recorded a 14% price drop over the past seven days.
The price drop has led to a wave of PEPE long positions liquidation in the futures market, totaling $7.73 million since Jan. 6, according to Coinglass data.
Total PEPE Clearances. Source: Coinglass
Liquidations occur in the derivatives market when the underlying asset's price moves against the trader's position, forcing the position to be closed due to insufficient funds to support it.
Long liquidations occur when traders who are betting on a price increase are forced to sell an asset at a lower price to cover their losses. This typically happens when the value of an asset drops below a critical level, forcing long traders out of the market.
Additionally, PEPE’s open interest has been declining in recent days. This highlights the low trading activity around the meme coin and contributes to its ongoing price decline. As of this writing, it is valued at $503 million, down 19% in the past week.
Open interest for PEPE. Source: Santiment
Open interest refers to the total number of contracts or positions outstanding in a derivatives market for a particular asset that have not yet been settled. When it decreases, it indicates that traders are closing their positions, indicating reduced participation in the market.
PEPE Price Prediction: Bearish Momentum Continues
PEPE continues to trade below a descending trend line on the daily chart. This pattern forms when the price of an asset makes a series of lower highs, indicating a downtrend.
When the asset trades below this line, it indicates ongoing bearish momentum and suggests that the downward pressure on the price is likely to continue. If this trend continues, the price of PEPE may drop to $0.000015.
PEPE Price Analysis. Source: TradingView
Conversely, if the buying pressure increases, the meme coin price may break above the declining trend line, which forms resistance at $0.000020.