SUI price decline signals: leverage unwinding and liquidity contraction happening simultaneously

Signs are emerging that the weakness of SUI( is not just a simple technical correction. During Tuesday’s trading, SUI failed to recover after a 5% plunge the previous day that broke below the $1.50 support level, and what is more noteworthy is that the scale of leverage liquidations in the derivatives market and on-chain liquidity contraction are accelerating simultaneously.

Trader Sentiment Shift: Risk Aversion Read Through Liquidation Ratios

Futures market data clearly shows a shift in trader sentiment. Over the past 24 hours, SUI’s open interest), a trading metric(, has decreased by about 10%, falling to $679.70 million. This indicates that the size of active positions is shrinking, and market participants are generally reducing their leverage exposure.

More specifically, long liquidations amounted to $3.14 million, while short liquidations were only $89,210. In other words, buy positions expecting a rebound are being liquidated on a large scale, rapidly tilting the market toward a bearish sentiment. As a result, the long-short ratio has dropped to 0.9238, reflecting that more traders are preparing for a downtrend.

On-Chain Liquidity Crisis: Decline in TVL and Stablecoin Market Cap

As concerning as the price decline is the weakening of economic activity on the SUI blockchain. Total Value Locked (TVL)) has decreased by 3.30% in 24 hours to $869.08 million, and more seriously, the market cap of stablecoins on-chain has plummeted by 25.72% over the past week.

The decrease in TVL indicates users are withdrawing funds from DeFi protocols, which directly leads to reduced network activity. Since stablecoins play a key role in on-chain transactions, lending, and swaps, a sharp decline in their volume signals a contraction in on-chain demand itself.

Technical Structure: Confirmed Breakdown of Descending Triangle, Next Support at $1.3924

On the chart, SUI has confirmed a downward break from the descending triangle pattern on the 4-hour timeframe. Since breaking below $1.50, it is trading below the S1 pivot at $1.47, and technically, the “least resistance path” is downward.

The current short-term key support level is the S2 pivot at $1.3924. While this zone could serve as the first line of defense where buying might come in, the strong current selling momentum also raises the risk that this support could become a “break point” rather than a reversal point.

Momentum indicators also support the bearish outlook. RSI has entered oversold territory at 28, and if RSI remains below 30, the downtrend could prolong. The MACD is also expanding its decline into negative territory, indicating that bearish momentum is strengthening.

Rebound Scenario Still Possible but Conditions Apply

A full bearish scenario is not the only possibility. If SUI recovers back above $1.50, then the 50-period EMA at $1.57 is expected to act as the first resistance. However, the most important factor at this moment is the “rebound itself,” which requires a recovery above $1.50 as a prerequisite.

In a situation where leverage liquidations, liquidity contraction, and technical bearish signals all occur simultaneously, it is prudent to prepare for further short-term declines. Whether the $1.3924 support can truly serve as a defensive line in the market will be a key focus for observers.