Sonic (S) has experienced a significant shift in market sentiment over the past 24 hours, as the altcoin’s value dropped by more than 20%. This decline is a stark indicator of growing selling pressure, and the liquidity outflows across the market have been a major contributing factor.

Declining Investor Sentiment

Sonic’s recent price action suggests that investor enthusiasm for the altcoin is rapidly waning. Over the last 24 hours alone, the coin has dropped significantly, leading to concerns about the coin’s potential for further declines. The broader market sentiment, particularly among derivative traders, is also struggling, further contributing to the bearish outlook.

The selling pressure is showing no signs of easing, and it appears that Sonic is caught in a downward spiral, with traders continuing to offload their positions. The combination of rising liquidity outflows and negative sentiment is creating a storm of bearish activity that could put additional downward pressure on Sonic’s price.

Liquidity Outflows: The Key Driver Behind the Drop

One of the most important factors behind Sonic’s recent price drop is the significant liquidity outflows observed over the past 24 hours. After a week of substantial inflows, where Sonic saw netflows of $116.1 million, the market sentiment took a sharp turn. In just one day, netflows turned negative, falling to -$4.3 million.

For those unfamiliar, liquidity netflows refer to the amount of cryptocurrency moving in or out of a blockchain within a given time frame. A negative netflow indicates that market participants are more inclined to sell rather than buy, which has played a crucial role in Sonic’s downward movement.

Additionally, Sonic’s Total Value Locked (TVL) has also seen a decline. TVL represents the value of all assets locked in a protocol, and it’s a key indicator of how much confidence investors have in the platform. As of now, Sonic’s TVL has fallen from $1.078 billion to $995.95 million, signaling a loss of approximately $82 million as market participants continue to sell.

Derivatives Market Traders Add to the Pressure

In addition to liquidity outflows, the derivative market has also been a significant factor driving Sonic’s decline. In the derivatives market, traders speculate on price movements or hedge their positions without owning the actual asset. A key indicator in this market, the funding rate, has turned negative for Sonic, with a reading of -0.0114%.

When the funding rate is negative, it suggests that short traders are dominating the market. These traders are betting on further declines in Sonic’s price, adding additional selling pressure. As a result, the combination of negative sentiment, rising short positions, and high trading volume has created a perfect storm for Sonic’s price.

Surge in Trading Volume

Sonic’s trading volume has surged by 417.19%, reaching a total of $44.02 million. This sharp increase in volume, coupled with the ongoing price decline, confirms that selling pressure is intensifying across the market. This heightened level of activity indicates that market participants are reacting strongly to the downtrend, and the selling trend is likely to continue in the short term.

The combination of high trading volume and declining price suggests that more losses could be in store for Sonic holders, especially if the broader market sentiment does not improve. For those holding long positions, the situation remains precarious.

Key Levels to Watch for Sonic’s Price

Despite the bearish outlook, there are still key levels to watch on the chart. If Sonic can hold its ground above a critical demand zone between $0.38 and $0.42, it could set the stage for a potential rebound. This demand zone has proven to be an important support level on previous occasions, helping Sonic to reverse its downward trend.

However, if Sonic fails to maintain this level, the next major target to watch will be $0.318. This level could serve as a critical point where further declines could either accelerate or stabilize, depending on the market sentiment at the time.

What’s Next for Sonic?

The price action in the coming days will depend heavily on the strength of the selling momentum. If the market remains bearish, Sonic could continue to see further declines. Conversely, if buyers step in and help the altcoin find support at the key levels, there could be a potential rebound.

However, given the current market conditions and the negative sentiment from both retail and institutional traders, caution is advised for anyone looking to invest in Sonic. The ongoing liquidity drain and the prevalence of short positions suggest that the altcoin could face additional turbulence before finding a stable footing.

Conclusion

Sonic’s price is currently under significant pressure, with liquidity outflows, negative sentiment, and high short interest driving the altcoin lower. While there are key support levels to watch, the path ahead remains uncertain. Investors and traders should keep a close eye on market conditions and the price levels discussed to assess whether Sonic can recover or if further losses are inevitable.