The memecoin market has experienced significant turbulence in 2026, with many tokens diverging from previous rally patterns and facing substantial losses. However, amidst this downturn, one prominent memecoin, PEPE, is exhibiting a fascinating array of on-chain signals that suggest a potential reversal, possibly setting the stage for a classic bear trap that could catch short sellers off guard.
PEPE's Resilient Positioning Amidst Market Slump
Despite the broader memecoin sector shedding billions and PEPE itself dropping 47% this year, its social activity remains remarkably strong, signaling persistent community interest. Crucially, PEPE has retraced to a historically significant support level around $0.0000035, a point that previously ignited a massive 152% rally in April 2024. This technical bounce, combined with a notable surge in Open Interest (OI) – adding nearly $30 million in fresh positions this week – indicates renewed trader positioning and increasing conviction around this critical price point.
On-Chain Metrics Hint at an Impending Short Squeeze
A deeper dive into PEPE's on-chain metrics further strengthens the case for a potential bullish breakout. Arkham Intelligence and Santiment data reveal a clear divergence: PEPE's Funding Rate has turned negative, indicating a heavy betting against the token, while the top 100 PEPE wallets have been accumulating a staggering 23.02 trillion coins since the October crash. This accumulation by whales, coupled with rising Open Interest and a negative funding rate at a historical support level, paints a compelling picture of a textbook bear trap. Should these trends persist, PEPE is poised to challenge its near-term resistance at $0.0000065, potentially replicating its past explosive surge and putting short positions at significant risk.
