Injective (INJ), one of the prominent assets in the decentralized finance (DeFi) space, has taken a sharp hit, dropping by 12% within the last 24 hours. This sharp correction, one of the largest among major cryptocurrencies, has raised questions among investors about the token’s short-term trajectory and long-term viability. While this drop may appear concerning, on-chain data reveals a more complex narrative that includes both warning signs and bullish signals.

The recent selloff has been primarily driven by the reappearance of long-term holders and high-activity users. According to data from Artemis, Injective’s “Returning Users” count surged to 57,700—the highest it has been in over a year. These users typically represent seasoned market participants who re-engage with the network when they sense an opportunity, often driven by profit-taking or strategic reallocations.

The timing of their return, coinciding with INJ’s sharp decline, suggests that many of these users are offloading their holdings. This wave of selling pressure from older, more experienced holders has contributed to the rapid drop in INJ’s price.

Meanwhile, new user activity has slowed significantly. Only 512 new participants joined the Injective ecosystem during the same 24-hour window, a figure that signals reduced enthusiasm among potential investors. This decline in new users reinforces the view that current market conditions are being perceived as high-risk, causing cautious investors to remain on the sidelines.

However, the downturn isn’t without a silver lining. Amid the selloff, certain investor groups have taken the opportunity to accumulate INJ. Combined, DeFi and non-DeFi investors acquired approximately $1.36 million worth of INJ in this period, suggesting a more optimistic long-term outlook by specific cohorts.

DeFi-focused investors alone purchased around $520,000 worth of INJ, much of which was deposited into liquidity pools, according to data from DeFiLlama. This activity boosted Injective’s Total Value Locked (TVL) from $33.9 million to $34.42 million in just one day. This increase in TVL is generally interpreted as a bullish signal, indicating growing trust in the protocol despite short-term price volatility.

Outside of the DeFi sector, investor confidence is also evident. CoinGlass data showed a net withdrawal of $840,000 worth of INJ from centralized exchanges into private wallets. This trend suggests that spot market participants are positioning themselves for a potential rebound by moving tokens into long-term storage.

In terms of market behavior, this accumulation indicates that investors are betting on Injective’s long-term prospects. Typically, when assets are moved from exchanges to private wallets, it reflects a desire to hold rather than trade. This contrasts sharply with the activity of returning users who may be selling for short-term gains or exiting positions under pressure.

To better understand what’s next for INJ, analysts are closely watching the liquidation heatmap—a tool that helps predict potential price movements based on where large concentrations of orders exist. According to the latest heatmap data from CoinGlass, the next significant liquidity zone lies above the current price, suggesting a potential move upward.

More specifically, the most concentrated liquidity area is around the $10.10 level, identified by the Supertrend indicator. Historically, when such liquidity clusters are formed, prices tend to gravitate toward them, making $10.10 a likely short-term target if the broader market remains relatively stable.

There’s also a smaller liquidity pocket slightly higher, around the $11 mark. If momentum shifts positively and buying pressure increases, INJ could see a short-term rally toward that level. However, it’s important to note that this is contingent on reduced selling pressure and continued accumulation.

Despite the recent slump, Injective remains a fundamentally strong project in the DeFi landscape. The blockchain has consistently attracted users with its fast transaction speeds and low fees. Moreover, the ongoing investments by both DeFi and non-DeFi participants reflect enduring confidence in Injective’s roadmap.

Still, investors should proceed with caution. While technical indicators and accumulation trends point to a potential rebound, the large number of veteran holders taking profits adds downward pressure that could cap gains in the near term.

In conclusion, INJ’s current market behavior presents a mixed bag. On one hand, aggressive selling by returning users has led to a steep decline in price. On the other, rising TVL and investor accumulation suggest that this may be a temporary dip rather than the start of a prolonged downturn. For those considering entry, it may be wise to watch for a confirmed bounce above key resistance levels like $10.10, paired with continued on-chain accumulation and rising user activity.