Velvet Plummets 37% Amid Short Seller Frenzy — But One Surprising Indicator Could Flip the Script Overnight
Velvet [VELVET] was riding high not long ago—one of the market’s brightest stars with gains that made heads turn. Then, out of nowhere, it nosedived by a staggering 37% in a single day, leaning into some serious bearish vibes. It’s the kind of sharp pullback that makes you ask: Did the whales just decide it was time to bail, or is there something deeper rattling the market? The drama sure echoes the brutal 87% crash of DeXe [DEXE], another token that once basked in glory. Yet, to give Velvet its due, even after this sell-off, it still sports a hefty 367% gain over the last three months—proof that the crypto seas are anything but calm. But what’s really pushing these waves—leveraged capital fleeing, short traders stepping up, or spot buyers quietly scooping up coins in the background? Let’s unpack the forces at play before we chart the next course. LEARN MORE
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.
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