Is the VELVET price rally over after its 300% surge?

VELVET price has remained near record highs after surging more than 300% in three days, although technical indicators and on-chain data suggest the rally is entering a more uncertain phase.

According to CoinGecko data, VELVET climbed from around $0.39 on June 26 to an all-time high above $2 on June 29 before easing to about $1.72 at the time of writing. 

The token was still up more than 260% over the past seven days despite the pullback, making it one of the strongest performers in the cryptocurrency market during the period.

Fresh buying interest emerged after Velvet consolidated all of its protocol-owned liquidity on Base into Aerodrome Finance, making the decentralized exchange the network's only liquidity venue for the protocol. 

The change concentrated trading activity in one marketplace, reducing slippage while improving order execution for traders.

Buying momentum strengthened further as Velvet introduced synthetic pre IPO markets offering tokenized exposure to private companies, including SpaceX. 

The launch drew speculative demand and coincided with the token's rapid move to new record highs.

The rally also unfolded while Bitcoin and Ethereum traded within relatively narrow ranges. 

With expectations that the US Federal Reserve will maintain restrictive monetary policy and the US Dollar Index remaining elevated, speculative capital has increasingly flowed into smaller narrative-driven tokens, allowing assets such as VELVET to outperform the broader crypto market.

VELVET price analysis

Recent price action suggests buyers remain in control, although momentum has started cooling after the sharp advance.

Charts showed buyers forced VELVET through the long-standing $0.60 to $0.67 resistance area, triggering a breakout that accelerated as short sellers covered positions and new buyers entered the market. 

The move carried the token to roughly $2.15 before profit-taking emerged near record highs.

On the daily chart, the relative strength index stood near 72, keeping the token in overbought territory after briefly climbing higher during the rally.

VELVET/USDT 1-day price chart. Source: TradingView.

Although elevated RSI readings often indicate strong buying momentum, they can also precede periods of consolidation or short-term pullbacks when traders begin taking profits.

The daily MACD remained in positive territory, with the MACD line holding above the signal line and expanding green histogram bars, indicating bullish momentum had not yet reversed despite the recent cooling in price.

Meanwhile, the 4-hour chart showed Chaikin Money Flow holding around 0.30, suggesting capital continued flowing into the asset rather than leaving it.

VELVET/USDT 4-hour price chart. Source: TradingView.

Fibonacci retracement levels also indicated VELVET was consolidating around the 23.6% retracement near $1.73 after rejecting the recent highs. 

Holding above that level could keep attention on the next resistance near the $2 region, while a deeper correction may expose the 38.2% retracement around $1.47, followed by the 50% level near $1.27.

Valuation concerns and supply risks remain

Despite the technical strength, several indicators point to risks that could weigh on price action over the coming sessions.

According to market tracking platforms, Velvet's fully diluted valuation has climbed to roughly USD 800 million (approx. $1.2 billion) while the protocol secures only about $770,000 in total value locked. 

The wide gap suggests the recent rally has been driven mainly by enthusiasm surrounding synthetic pre IPO trading and artificial intelligence-focused decentralized finance narratives rather than corresponding growth in on-chain usage.

Blockchain transaction data also showed market maker DWF Labs transferred nearly 29 million VELVET tokens to centralized exchanges during the rally. 

Although those transfers do not confirm immediate selling, they have drawn attention because they occurred alongside a sharp increase in trading activity.

Additional supply could also enter the market soon.

Token unlock schedules indicate about 10.4 million VELVET tokens are due to be released on July 10, creating another potential source of selling pressure if speculative demand begins to fade after the recent rally.