- Liquidity outflows have risen across the market over the last 24 hours, implying mounting selling pressure
- Market sentiment, particularly among derivative traders, is still struggling
In the last 24 hours alone, Sonic has seen one of its steepest declines. In fact, the altcoin fell sognificantly by over 20.37%, confirming the effect of sellers in the market.
The selling pressure might not come to a halt anytime soon though. Especially as the sentiment among traders remains sharply negative, with the price action hinting at the potential for a further market correction.
Massive liquidity outflows affect altcoin
The latest decline in S can be associated with the massive liquidity outflows on both the chain and protocol levels.
Following a week of massive chain inflows, with S seeing netflows climb to a high of $116.1 million, the sentiment began to shift. In just 24 hours, market participants began to take out liquidity, placing the netflows at negative $4.3 million.
Here, chain netflows refer to the net amount of a crypto asset moving into or out of a blockchain over a specific period. A negative reading, as in this case, seemed to imply that market participants are selling into the market.
Source: DeFiLlama
Sonic’s total value locked (TVL) has continued to drop too. TVL puts a valuation on the applications relying on a blockchain. At the time of writing, Sonic’s TVL had fallen from a high of $1.078 billion to $995.95 million – Losing approximately $82 million as market participants continued to sell.
This downward force has played a major role in S’s decline. However, derivative market traders are also selling the asset.
Derivatives traders join the selling trend
In the derivatives market, where traders open positions to speculate on price movements or hedge risk without needing to own the actual asset, short positions have been dominant.
At the time of writing, a key metric known as the funding rate turned negative too, with a reading of -0.0114% for S. The funding rate measures which cohort of the market is paying a premium fee periodically to maintain market disparity between the spot and futures price of an asset.
Source: Coinglass
In a case where the funding rate is down to this level, it means that short traders are dominating most positions opened on S and are betting on a further market decline.
This selling pressure has been backed by high trading volume in the market. The trading volume surged by 417.19% to $44.02 million. This major jump in volume, alongside a price decline, seemed to confirm high selling pressure across the market.
Notably, if the selling pressure keeps growing alongside the price, then the downtrend could further intensify, with S holders and long traders recording further losses. Hence, AMBCrypto analyzed to see where the price currently stands and what its potential movement could be.
Sonic’s movement on the charts
S’s movement depends on the price not falling below a key demand level on the chart. This demand zone, which lies between 0.38 and 0.42, has been a point for proving uptrends on the past two occasions of encounter.
Failure to hold this level would mean that S will take a hit.
Source: TradingView
The next target for price trading below this level will be $0.318.
Depending on the level of selling momentum in the market, trading into this level would imply whether the asset continues to decline or sees a rebound.
