VELVET Rallies 35%, But Rising Leverage Raises Reversal Risks
VELVET's price surged by 35.34% in recent days, driven by explosive spot and derivatives activity that fueled stronger participation. The altcoin hit $0.5860 on the charts, with spot volume rising by approximately 1,030.09% and derivatives volume soaring by 5,311.17%. This significant hike in trading activity has provided VELVET a wider base of support in its progress.
Rising leverage adds fuel and fragility to the rally, however. The Open Interest rose by 65.81% to $39.07 million as market participants took on more derivatives positions. While this hike still carried important implications for the rally's durability, it also increased leveraged exposure. A sudden turn of events in prices may lead to quicker rebalancing on the derivatives market.
Top traders maintain a clear long bias while VELVET's trading activity expands. Long positions accounted for 60.76%, compared to the 39.24% held by shorts, with their Long/Short Ratio standing at 1.55. This imbalance reinforces the rally's direction of support from Binance's biggest traders.
However, a strong bullish build-up comes with significant risks. A sudden rejection could pressure crowded long positions and intensify volatility through forced position reductions. The bullish imbalance might get easily shattered if trading volume slows down significantly following the explosive growth.