A recent token unlock by Sonic [S] has fueled renewed concerns in the cryptocurrency market, as $74.59 million worth of S tokens were released into circulation on July 5. This influx represents 5.17% of the total supply and 7.39% of the circulating supply, according to data from DeFiLlama. While unlocks are a normal part of tokenomics schedules, the scale and timing of this event have ignited fears that a fresh wave of selling pressure could lead to another steep price decline—much like what happened during Sonic’s last major unlock in January.

The timing of the unlock couldn’t have been worse for S holders. The broader crypto market is already navigating a cautious period, and the sudden increase in available tokens threatens to tip the balance of supply and demand further toward bearish territory. Analysts warn that unless there is a matching surge in demand—which currently appears unlikely—the market could see continued downside in both spot and derivative markets.

The selloff has already begun. Between July 3 and July 5, decentralized finance (DeFi) investors significantly reduced their exposure to S. According to DeFiLlama data, DeFi wallet holders withdrew $37.9 million worth of S tokens from various platforms. This led to a drop in total value locked (TVL), which fell from $836.44 million to $798.49 million within just 48 hours. The move reflects a clear shift in sentiment, from long-term holding toward a more cautious or bearish stance.

Retail traders also joined the exit. Exchange netflow data from CoinGlass reveals that $427,000 worth of S tokens were moved from private wallets to centralized exchanges over the past week. Notably, $110,000—over 25% of that total—was moved in the last 24 hours alone. These movements often indicate that investors are preparing to sell, adding further downward pressure on price.

In the derivatives market, the sentiment is no better. Data from Coinalyze paints a stark picture of the imbalance between long and short positions in the perpetuals market. Long traders were hit with $182,800 in liquidations, compared to just $8,400 lost by shorts. For every dollar lost by bearish traders, bullish positions suffered losses exceeding $21,000—a lopsided figure that shows sellers clearly hold the upper hand.

The ongoing bearish activity has brought back memories of Sonic’s previous unlock event in January. On January 4, nearly $1 billion worth of S tokens were released into the market. Within just three days, the token had lost 13.5% of its value, and by January 20, it had fallen by a cumulative 42.75%. That event left a lasting impression on investors, many of whom now fear a repeat scenario.

At the time of writing, the S token had formed a local high on June 25. While the current price action hasn’t yet confirmed a breakdown, analysts point to the $0.3022 support level as a key threshold. If the price breaks below this point, it could confirm the formation of a local lower low—often a precursor to a deeper correction. Combined with rising selling pressure and a jump in circulating supply, technical signals suggest that Sonic could be at risk of entering a sharper downtrend.

Investors are now closely monitoring whether the market can absorb the increased token supply without triggering further volatility. Historically, large unlock events have created uncertainty, particularly when market conditions are already fragile. For now, it appears that the majority of traders—both institutional and retail—are playing defense.

With no immediate signs of a demand surge and increasing signs of distribution, the path of least resistance for Sonic’s token may be downward, at least in the short term. Unless buyers step in aggressively or market sentiment turns unexpectedly positive, the $74.59 million unlock could mark the beginning of another extended dip for the S token—just like it did six months ago.