Sonic SVM [S] It has dropped 12% over the last 24 hour, which is one of market’s steepest drops. At press time the drop was expected to continue as the week progressed.
An apparent convergence between off-chain and chain metrics led to a more significant drop. Investors will have to unload their S positions at discounted rates.
Sonic users and activity on the chain are growing in parallel
On-chain activities across the Sonic blockchain has spiked notably over the past week, with two metrics standing out in particular—Daily Active Users (DAU) and the volume of chain transactions.
The data at the time this article was written revealed that the number of users in the network had risen from 6200 to 7600, week over week. It was estimated that the number of users had increased by 22.6% over just seven days.
The surge in activity is not isolated and it tends to increase the overall chain’s performance. Sonic followed this pattern with an equal increase in transaction numbers.
Artemis data highlighted on-chain transactions at 228,000 too – A figure that underscores how active participants have remained across the network, despite the price weakness.
A rise in price like this is normal. S could have fallen by 25 % in the past month, yet the opposite is likely to be true. If you look closely at the data, it may be that recent increases in the on-chain activities are due more to the selling of products than new demand.
Sonic’s activity on the chain tracks outflows not inflows
This increase in activity on the chain can be linked to capital flowing out of the network, rather than into it. The surge could be reframed by this finding.
TVL (total value locked) is one of the most obvious indicators of this liquidation drain. This decline coincided with the growth in users and transactions.
TVL is a measure of how much capital has been deposited onto a blockchain. It can be used as an indicator for investor sentiment, since inflows indicate a longer-term commitment and greater willingness to invest, while outflows could signal a short-term pressure to sell.
Sonic’s TVL was down by approximately $16.07million at the time this article was written. Even though the volume of decentralized exchanges (DEX) pushed in the other directions, Sonic’s TVL was still down to approximately $16.07 million.
DeFiLlama data also highlighted DEX volume surging to $3.27 million—its second-highest reading of the month and third-highest since March—while Sonic’s own trading volume sat around 51% higher on the day at $26.8 million.
The selling momentum is boosted by a rise in volume against falling prices. As long as volumes remain high, traders are likely to continue pushing in the same direction.
Buyers are holding back.
Spot market activity has remained largely calm, with very little buying and selling.
Netflows at the end of last week were supportive, and may have indicated that some buyers had been quietly stockpiling. They carried a net flow of $20,000 for a total of $231,000 in purchases over the entire week. But a meaningful bounce from here will require that buyers ramp up their buying much more quickly.
For now, the buying pressure is too weak to support a sustained move upwards in near-term.
Final summary
- Sonic saw a 23% increase in DAUs and surpassed 228,000 transactions, while TVL had outflows.
- The positive spot netflow suggests that the accumulation is too small to absorb all of the sales, leaving S vulnerable to further downside.
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Source: ambcrypto.com
