PEPE: Assessing the possibility of a further decline in the memecoin’s prices

• PEPE’s NPL dip suggested that a price bottom has been reached. 
• Increased sell-offs amid waning sentiment, however, puts the memecoin at risk of further decline.

Popular memecoin Pepe [PEPE] saw its Network Realized Profit/Loss (NPL) metric decrease on August 5, data from Santiment showed. However, the altcoin’s price rebounded shortly after, sparking speculation that the cryptocurrency may have hit a price bottom.

Source: Santiment

Read Pepe’s [PEPE] Price Prediction 2023-24

The NPL metric tracks the net profit or loss for all coins spent over a given time period. It reflects aggregate market sentiment, capital inflows or outflows, and trends in network profitability. When this metric returns positive values, traders are booking profits on their transactions. Conversely, negative values suggest that a coin’s sell-offs have only returned losses.

A dip in this metric, as with PEPE, is often taken as a price-bottom marker. According to Santiment, these dips “often signal short-term capitulation of ‘weak hands’ and the re-entry of ‘smart money,’ which is why they tend to coincide with local bounce backs and periods of price recovery.”

But Hold Your Horses, PEPE Enthusiasts

While PEPE’s NPL suggested that the token may have reached a price bottom, a closer assessment of its on-chain performance revealed that there remains a high chance of a further drop in value.

At press time, the memecoin exchanged hands at $0.000001164. In the last week, PEPE’s value has declined by 13%, per data from CoinMarketCap. This has been due to a surge in sell-offs.

A look at the token’s exchange activity showed a steady uptick in its supply on exchanges while its supply outside crypto exchanges dwindled since the end of July. During that period, PEPE’s supply on exchanges has grown by 10%. On the other hand, its supply outside of exchanges has gone down by 6%.

When an asset’s exchange reserves increase in this manner, it signals increased distribution activity as many traders “dump” their holdings to hedge against losses.

Source: Santiment

Key momentum indicators on a daily chart lent credence to the position above. At press time, they all rested below their respective neutral regions. Practically oversold at the time of writing, PEPE’s Relative Strength Index showed 33.06. Its Money Flow Index was at 27.34.

Likewise, its Chaikin Money Flow logged a negative value of -0.13. This suggested liquidity exit from the PEPE market, making any price rebound almost impossible unless sentiment changes.

Source: PEPE/USDT on Trading View

How much are 1,10,100 PEPEs worth today?

The reason for the increased sales was attributed to the sustained profitability of PEPE transactions. On a 30-day moving average, the token’s ratio of daily on-chain transactions in profit has exceeded those that returned losses.

However, with weighted sentiment below zero, the number of profitable transactions is due to drop significantly in the coming days.

Source: Santiment