Velvet (VELVET) fell 75% over the past week, losses continuing as downside pressure intensifies. At press time, the asset had fallen another 16% over the past 24 hours under the same selling pressure.
The intriguing dynamic behind this decline is that traders in the spot and perpetual markets are holding long-side positions, committing capital against the current tide for Velvet.
Velvet Loops Under Increasing Sales Pressure
Velvet is absorbing stronger selling pressure and bearish sentiment, a visible change in the asset’s trading volume and decreasing capital base in its perpetual market.
The Taker Buy Sell ratio, which measures long versus short trading volume in the perpetual market, has tilted toward the sell side as the reading slides to 0.95 at the time of writing.
A ratio less than 1 indicates that sellers are dominating volume across multiple accounts. The sales volume is not very exaggerated, however, since the figure is barely below bar 1 on the chart. This sale coincided with a contraction in Velvet’s capital in the perpetual market, with investors withdrawing their funds due to concerns over high volatility.
Data from CoinGlass showed that Open Interest, which tracks capital movements in the perpetual market, plunged from $29.36 million to $21.07 million, a 28% decline over the period.
Traders hold long positions during the sell-off
What is compelling about this picture is that traders’ positioning remains long, despite increasing sales volume and contracting capital. The funding rate, which reflects whether market positioning favors buyers via long trades or sellers via short trades, printed a reading of 0.0050%.
A positive reading, as in this case and only slightly, indicates that traders are still positioned significantly ahead of an upcoming upward move.
However, longer term, they have reason to be confident of a recovery, as Velvet has surged 59% in the past thirty days and 533% quarter-over-quarter, almost ten times the monthly figure.
The short-term conviction remains questionable, however, since long positions have lost more than short positions, with the last 24 hours as a reference.
Total liquidations reached $558,320 during this period, and long liquidations made up the majority at $490,520, a result that made shorting Velvet more profitable than shorting.
One-time buyers accumulate despite the decline
Spot investors continue to reinforce the broader market narrative as their buying activity increases.
At the time of analysis, total purchases from spot investors reached $1.58 million this week alone. Nearly half of that came in the last 48 hours, with a net Velvet flow worth $781,000 supporting the buy side.
When the net flow confirms stronger net purchases in the spot market, it often suggests that investors view the recent decline as a discount and an opportunity to accumulate. Continuing this buying trend would give Velvet a solid base for a near-term rebound.
Final Summary
- Velvet has fallen 75% over the past week and another 16% in one day, with traders pulling money out of the market as selling picks up.
- Cash buyers invested $1.58 million in Velvet this week, betting that the lower price is a chance to buy ahead of a possible rally.
