Three Altcoins Poised for Liquidation Records in Early December

As of December 1, market sentiment has shifted into extreme fear, with short positions taking precedence in the derivatives market. Several key altcoins are showing significant imbalances in their liquidation patterns, which could lead to unprecedented liquidations.

Key Takeaways

Market sentiment has turned negative, with high short positions in the derivatives space.
Ethereum (ETH), Solana (SOL), and XRP are showing significant potential for liquidation spikes.
Reduced supply of ETH on exchanges could indicate imminent price recovery.
Rising stablecoin supply suggests increased liquidity, which may benefit the cryptocurrency market.

This article examines the factors that might cause deviations from short-term market expectations in the first week of December.

Ethereum (ETH)

Ethereum’s liquidation map over the past week reveals that the total volume of liquidations from short positions is significantly higher than that from long positions, suggesting that traders are heavily shorting ETH.

Should ETH bounce back to $3,150 this week, the total amount of short liquidations could exceed $4 billion.

ETH Exchange Liquidation Map. Source: Coinglass

What should short sellers of ETH keep in mind? On-chain data concerning ETH's exchange balances could serve as a critical indicator. Data from CryptoQuant indicates that the ETH supply on exchanges has dropped to a record low of 16.6 million ETH. This ongoing trend of withdrawing ETH from exchanges has accelerated, even as the price declines.

Ethereum Exchange Reserve. Source: CryptoQuant

Investor Momin anticipates that with ETH exchange reserves at their lowest levels, Ethereum could spearhead the next phase of market recovery. While some analysts predict further price declines, the continued accumulation and reduced supply on exchanges might enhance scarcity as selling pressure diminishes, potentially driving a swift recovery in ETH.

Solana (SOL)

Just like Ethereum, Solana also exhibits a clear imbalance in its liquidation landscape. In early December, traders have been actively shorting SOL.

If SOL rebounds to $145 this week, the cumulative amount of short liquidations could exceed $1 billion.

SOL Exchange Liquidation Map. Source: Coinglass

Is there a rational basis for SOL to recover this week? On-chain indicators are showing encouraging signs. Nansen’s data confirms that Solana continues to lead in transaction volume this week.

In prediction markets, many traders forecast price levels ranging from $150 to $200 in December. Moreover, US-based SOL ETFs have enjoyed five consecutive weeks of inflows. Recently, Arthur Hayes, co-founder of BitMEX, highlighted that only Ethereum and Solana possess the institutional use cases necessary for lasting success.

XRP

XRP’s liquidation map for the past week indicates that short positions are prevalent. If XRP regains momentum and moves above $2.30 this week, liquidations from short positions could reach over $500 million.

XRP Exchange Liquidation Map. Source: Coinglass

Short sellers should be aware of several factors impacting XRP’s price. Various analysts suggest that XRP could potentially reach $2.60 this month, which would significantly challenge short positions.

Increasing Stablecoin Supply Hints at Potential Market Rebound

Another important aspect to consider is the renewed rise in stablecoin supply. Coinglass reports that the total market capitalization of USDT, USDC, DAI, and FDUSD has surged to a record $267.5 billion at the beginning of December.

Total Stablecoin Market Cap (USDT, USDC, DAI, and FDUSD). Source: Coinglass

The rise in stablecoin supply indicates that market liquidity could increase in December. Analyst Ted remarked that this upward trend signals the end of a four-week decline in stablecoin market capitalization. He noted, “As stablecoin market cap increases, it may lead to fresh liquidity entering the crypto market, which would be beneficial for BTC and altcoins.”

The three altcoins discussed in this article have a combined potential liquidation volume of $5.5 billion if the market experiences an unexpected recovery. If authentic recovery occurs, we could witness a new record in liquidations. Investors should consider these factors to minimize risks in their positions.