Virtuals Protocol (VIRTUAL), an artificial intelligence token, has remarkably defied predictions of a looming "bubble phase" and potential weakness. Instead, VIRTUAL has extended its upward momentum, rallying by 21% and emerging as the top gainer over the past day, a significant turnaround after previously recording a 12% loss. This unexpected surge is rooted in a compelling blend of community sentiment, robust on-chain activity, and strategic moves in the derivatives market.
Community Sentiment Fuels On-Chain Growth
The primary catalyst for VIRTUAL's impressive recovery was an overwhelming shift in investor sentiment, evidenced by a recent community vote where approximately 83% of participants (over 86,000 out of 104,000 investors) turned bullish. This strong positive outlook has directly translated into heightened user engagement and protocol revenue. Data reveals a notable increase in active spot users trading VIRTUAL across decentralized exchanges, climbing to 3,700—a level last observed in mid-December. This surge in trading volume and user adoption has concurrently pushed daily protocol revenue past $26,000, a figure last recorded during a period of considerable market fear, signaling a strengthening foundation for sustained growth.
Derivatives Market Propels the Rally
Further bolstering VIRTUAL's upward trajectory is robust activity within the derivatives market, characterized by a significant influx of liquidity from investors opening long positions. Market data indicates that liquidity surged by more than $24.4 million over the past day, with the majority of these flows tied to buy-side contracts. The Open-Interest-Weighted Funding Rate, a key indicator of perpetual market liquidity and positioning, stood at a positive 0.0055%, clearly signaling buyer dominance. This trend is further supported by long-to-short data, which shows a stronger buy pressure with a higher volume of long contracts changing hands compared to short positions, underscoring the prevailing bullish sentiment among derivatives traders.
Navigating Potential Headwinds
Despite the strong performance, an analysis of liquidation clusters on the price chart reveals that some downside risk persists, as a greater concentration of these clusters remains below the current price, potentially acting as "price magnets." However, the immediate threat of a sharp decline appears limited due to a notable disparity in liquidation volumes: short liquidations ($491,000) have significantly outpaced long liquidations ($134,000). This imbalance provides long traders with a relative advantage, suggesting that while caution is warranted, the current market structure may mitigate severe downward pressure.
