Velvet crashes 37% as shorts take control – But THIS signal hints at…
Whale activity surged during the crash, yet the data stops short of proving distribution.
Velvet [VELVET], one of the market’s leading recent gainers, fell sharply as leveraged capital exited. The token declined as much as 37% during the day while bearish pressure intensified.
The sell-off resembled DeXe’s [DEXE] 87% crash after both tokens previously led the market’s gainers.
Even after its decline, Velvet retained a 367% gain over the past 90 days.
Are whales driving VELVET’s decline?
Whale activity increased sharply during Velvet’s latest decline.
CoinGlass’s Whale vs Retail Delta climbed to 0.098, one of its highest readings this year. However, the positive reading confirmed elevated whale participation rather than proving that whales caused the sell-off.
Meanwhile, $32.33 million in perpetual-market capital exited during the past day. Net outflows reached $1.55 million over the same period.
Across 15 days, total leveraged outflows climbed to $516 million, while Netflow reached approximately $16.1 million. This decline in leveraged capital weakened VELVET’s derivatives market and left price support increasingly dependent on spot demand.
Why are short traders taking control?
Shrinking leveraged capital coincided with a sharp shift towards short positioning.
The Funding Rate fell to -0.0314%, indicating that short traders paid long traders to maintain their positions. This negative reading reflected stronger bearish positioning across Velvet’s perpetual market.
The last comparable Funding Rate decline occurred on the 29th of June.
Before that decline, positive Funding Rates showed that long positioning dominated the market.
Afterwards, positive readings remained close to neutral, suggesting that bullish leverage had weakened considerably. If this pattern repeats, limited long positioning could reduce the likelihood of a leverage-driven recovery.
Can spot buyers stop the decline?
By contrast, spot investors appeared to accumulate VELVET during the price decline. Spot Netflow fell to -$357,000, showing that exchange outflows exceeded inflows.
Negative Spot Netflow may indicate accumulation because tokens leaving exchanges become less immediately available for sale.
However, the metric cannot confirm that every withdrawal represented a new purchase. Over seven days, Spot Netflow reached -$1.03 million, maintaining the pattern of net exchange outflows. Sustained spot demand could cushion VELVET’s decline, although weak derivatives positioning may delay a broader recovery.
Final Summary
- VELVET fell 37% as leveraged outflows and bearish derivatives positioning weakened momentum.
- Spot accumulation offered support, but subdued bullish leverage could restrict any immediate recovery.
