Velvet [VELVET] tumbled sharply, losing up to 37% in a single day as leveraged traders pulled out en masse, shifting control to short sellers. The sudden drop echoed the dramatic 87% plunge previously seen in DeXe [DEXE], another token that had recently surged before crashing.

Despite this sharp fall, Velvet’s price remains up by 367% over the last 90 days, showing resilience compared to earlier gains. However, the current sell-off has put the spotlight on the influence of whales and leveraged capital in the token’s pricing dynamics.

Whale Movements and Leveraged Outflows

During Velvet’s recent plunge, whale activity surged notably. According to CoinGlass data, the Whale vs Retail Delta reached 0.098, marking one of the highest points this year for whale participation. This suggests large holders were active, though it doesn’t definitively prove they triggered the sell-off.

Capital fleeing Velvet’s perpetual futures market totaled $32.33 million in the past 24 hours, with net outflows of $1.55 million. Over the past 15 days, leveraged outflows hit $516 million, while net flows reached $16.1 million. This mass exodus of leveraged capital weakened the derivatives market, making price support rely more heavily on spot buyers.

The switch in market sentiment was clear as the Funding Rate dropped to -0.0314%, meaning short sellers paid longs to keep their positions open. This negative funding rate signals that bearish traders are dominating Velvet’s perpetual market. The last time funding dipped this low was on June 29, following a period where positive funding indicated strong long positions. Since then, bullish use has dwindled, making a use-driven bounce less likely.

Meanwhile, spot investors appeared to be accumulating Velvet despite the price drop. Spot Netflow data showed exchange outflows outpacing inflows by $357,000, implying tokens were being withdrawn from exchanges and potentially held off-market. Over a week, this trend persisted with a -$1.03 million net outflow, which could provide some price support even as derivatives markets remain weak.

This material is for informational purposes and does not constitute financial advice.