Sonic Token Price Drops 13.5% After $74.59 Million Unlock

On the 5th of July, a significant token unlock event for Sonic [S] took place, injecting $74.59 million worth of tokens into circulation. This event accounted for 5.17% of the total supply and 7.39% of the circulating supply, according to DeFiLlama. The sudden increase in the floating supply raised concerns about a potential supply glut, which could trigger further downside across spot and derivatives markets if not matched by proportional demand.

Market participants have already begun selling the asset, adding downward pressure to its performance. DeFi investors made the first move, offloading $37.9 million worth of S tokens between the 3rd and 5th of July. Their cumulative holdings dropped from $836.44 million to $798.49 million, indicating a shift from long-term holding to a more bearish, sell-oriented sentiment.

On-chain metrics showed that the trend wasn’t isolated to DeFi investors. Retail investors followed suit, with a significant outflow of assets over the past week, totaling $427,000 moved from private wallets to exchanges. The most notable selloff occurred within the past 24 hours, during which spot investors sold approximately $110,000 worth of S crypto, accounting for more than 25% of the week’s total outflows.

Liquidation data further confirmed bearish sentiment in the perpetual markets. In the perpetuals market, long traders saw $182,800 in liquidations, while shorts lost just $8.4. This lopsided ratio implied a market tilted heavily in favor of sellers, with bullish longs being hit for over $21,000 for every $1 wiped from bearish traders.

Analyzing S’s performance during its last major token unlock in January, when $998.72 million worth of Sonic token entered circulation, the token experienced a notable drop. From a local high on the 4th of January, S token declined 13.5% by the 7th. By the 20th of January, it had recorded a cumulative decline of 42.75% after forming a local low. At press time, S created a local high on the 25th of June. While this does not confirm an impending price drop, a break below the support level at $0.3022 could signal the formation of a local lower low.

Given the prevailing bearish trend and additional supply pressure expected from the token unlock, S is likely to break down and form a new lower low. The likelihood of an equal surge in demand remains slim, according to AMBCrypto analysis. This increase in float suggests that if supply outweighs demand, it could lead to a market-wide selloff.