Rising stablecoin supply signals fresh liquidity and a possible early-December market recovery.
Market sentiment shifted into extreme fear on December 1. Short positions are dominating the derivatives market. Several major altcoins are exhibiting severe imbalances in their liquidation maps, which could trigger a new record in liquidations.
The following analysis highlights the underlying factors that could cause the market to deviate from short-term expectations in the first week of December.
ETH’s 7-day liquidation map shows that cumulative liquidation volume from short positions significantly outweighs that of long positions. This indicates that traders are aggressively shorting ETH.
If ETH rebounds to $3,150 this week, cumulative short liquidations could exceed $4 billion.
What risks should short sellers consider? On-chain data on ETH exchange balances may be an important signal.
CryptoQuant data shows that ETH supply on exchanges has dropped to an all-time low of 16.6 million ETH. The trend of withdrawing ETH from exchanges has accelerated over the past month, despite ETH’s price decline.
“With ETH exchange reserves hitting record lows… I believe Ethereum will lead the next market leg up,” investor Momin predicted.
Although many analyses suggest further downside, the ongoing accumulation, reflected in falling exchange supply, could soon amplify scarcity as selling pressure weakens. This could trigger a sudden recovery in ETH.
Similar to ETH, SOL shows a clear imbalance in its liquidation map. Traders have been actively shorting SOL in early December.
If SOL rebounds to $145 this week, cumulative short liquidations could surpass $1 billion.
Is there a basis for SOL to recover this week? On-chain indicators are reflecting positive signals. Nansen reported that Solana continued to lead in transaction count during the week.
On prediction markets, many investors still expect a price range of $150-$200 in December. Additionally, US-based SOL ETFs have experienced five consecutive weeks of inflows.
Recently, BitMEX co-founder Arthur Hayes also stated that only Ethereum and Solana have the institutional use cases necessary for long-term survival.
XRP’s 7-day liquidation map indicates that short activity is dominant. If XRP rebounds above $2.30 this week, cumulative short liquidations could exceed $500 million.
Short sellers should consider several factors.
With these drivers, many analysts predict that XRP could reach $2.6 this month. Such a move would severely impact short sellers.
Another factor worth considering is the renewed expansion in stablecoin supply.
Coinglass data shows that the combined market cap of USDT, USDC, DAI, and FDUSD reached a new high of $267.5 billion at the start of December.
The rising stablecoin supply suggests that market liquidity may increase this month. Analyst Ted noted that this uptrend ends a four-week decline in stablecoin market cap.
“Stablecoin MCap is going up again. It went down for 4 consecutive weeks, which also explains the reason behind the dump. If this goes up from here, fresh liquidity will enter the crypto market, which is good for BTC and alts,” Ted said.
The three major altcoins mentioned above account for a combined $5.5 billion in potential liquidation volume if the market rebounds unexpectedly.
If a genuine recovery occurs, a new record for liquidation may be set. Investors may need to consider all these factors to minimize risks to their positions.
