For altcoin investors, December 2025 can only be described as a disaster. Although Bitcoin dropped from $106,000 to $86,000 making headlines across major media, the real protagonists of this bloodbath were Ethereum, XRP, Solana, and the entire altcoin market. In the chilling 24-hour flash crash that occurred on December 15, over $440 million in leveraged positions were forcibly liquidated, with an astonishing $355 million in long positions.

The selling spree continues unabated. The price of Ethereum plummeted from over $3,500 in mid-December to $2,827 on December 18, a drop of more than 21% from recent highs. XRP initially attracted attention due to clearer regulatory prospects and the potential for ETF issuance, but then it fell by 27% year-on-year, with a single-day drop of up to 3.5%, ultimately selling for only $1.86. Solana, as a darling in the DeFi applications and 'meme coin' sector, also saw its price plummet 44% from its peak of $222 in November to $123.

Why are altcoins suffering heavy losses?

Altcoins lag behind Bitcoin, a typical manifestation of the 'flight to safety' seen during a cryptocurrency bear market. As the macroeconomic environment deteriorates and risk appetite declines, funds will inevitably flow from the altcoin market to Bitcoin, the cryptocurrency 'safe haven'. This trend was particularly evident in December trading: Bitcoin's market cap share continued to rise, while altcoins' market cap shrank.

Moreover, several other factors have exacerbated the plight of altcoins. Firstly, the much-anticipated Ethereum 'Fusaka' upgrade (which will introduce PeerDAS and Verkle trees) has not provided substantial price support, as market participants are more focused on its technical aspects than other factors. Secondly, XRP's price surge driven by rumors of 'spot ETF approval' several months ago has now completely receded.

Solana also faces unique challenges. Despite tripling its DeFi market share at the beginning of 2025 and attracting billions in funds, its native token Solana has suffered the same pressures as Ethereum. The price of Solana tokens dropped from $222 to $123, a decline of up to 44%, rendering the gains of the previous months almost meaningless for leveraged positions.

Liquidation cascade: market crash analysis

The $440 million liquidation that occurred on December 15 was not an isolated incident; leverage had surged in the previous weeks, and the market environment was very unfavorable. Liquidations focused on long positions (i.e., positions aimed at increasing with rising prices) accounted for 81% of the total liquidation amount, indicating a one-sided nature of these positions. Bitcoin's liquidation amount was $128 million, while Ethereum's was $15.1 million.

Liquidations occur when traders using borrowed funds find that their margin does not meet the minimum threshold, leading exchanges to automatically close positions. In less liquid markets (liquidity is usually low in December due to holidays), these liquidations can trigger a chain reaction of prices due to a surge of orders into the market.

The largest single liquidation occurred on the HTX exchange, with a forced closure of a long position worth $33.95 million in BTC/USDT. Hyperliquid had the highest liquidation total, reaching $374 million, of which 98% were long positions; Bybit followed with $315 million in liquidations; Binance was at $250 million. From the perspective of the platforms where liquidations primarily occurred, this liquidation mainly affected retail traders rather than institutional accounts.

Ethereum's dominance in the DeFi space collapses

Ethereum's decline is particularly concerning, as the platform is a crucial component of the DeFi space. The total locked value (TVL) in DeFi plummeted from $172 billion at the beginning of October to $114 billion at the start of December, representing a 34% drop within two months. Although Ethereum's share of the DeFi TVL remains high at 55%, its absolute value has significantly shrunk, with ETH prices falling from above $3,500 to below $3,000.

This is also a consequence of price issues, more precisely related to the actual capital outflows from DeFi platforms, as users reduce risk and withdraw liquidity. Platforms that achieved great success during the 2024 bull market are now losing users and total locked value (TVL) due to the risks of prolonged high interest rates, diminishing the attractiveness of yield farming and staking compared to traditional fixed-income sources.

The Ethereum Layer 2 ecosystem, which was highly spotlighted a few months ago, has also been affected. Although scaling solutions like Arbitrum and Optimism show some application momentum, the decline in Ethereum's price has weakened the economic incentives for using these networks.

XRP's regulatory hopes meet macro realities

"XRP's performance in December illustrates how native cryptocurrency factors and macro factors intertwine. Earlier this year, speculations about the imminent approval of a spot ETF and Ripple's victory over the SEC led to a surge in XRP prices. By mid-November, whales had purchased large amounts of XRP, totaling over $2.4 billion."

However, by mid-December, this sentiment seemed to have dissipated. XRP has fallen 27% over the past year, with an intraday drop of 3.5%, as the price fell from $1.86 to a high of $2.20 in November. Alarm bells are ringing: no matter how many regulatory victories cryptocurrencies claim or how many ETF rumors circulate, it all means nothing when the Federal Reserve reduces interest rate cuts.

"The liquidation data from the XRP market is disheartening. During last December's sell-off, the cumulative trading volume exceeded 185,000, with long traders suffering the most due to breached support levels. Predictions suggest that if the key support level of $1.80 is breached, price corrections could touch $1.50 or even drop to $1.20."

Solana's meteoric rise faces a heavy blow

Solana's price plummeted from $222 to $123, marking one of the most severe reversals in altcoin prices since December 2025. As a blockchain, Solana's DeFi TVL market share tripled to 7.3%, and it set historical highs in trading volume, which is undoubtedly an impressive achievement. However, the macroeconomic environment is clearly unfriendly.

The $2.4 billion influx that drove Solana's price up at the beginning of the year has now reversed, with traders selling off high beta altcoins in favor of safer markets like cash or stablecoins. The meme coins on the Solana chain, which sparked significant speculation in Q3 and Q4, have also seen declines, further weakening the chain's market activity.

Solana's liquidation data reflects the plight of the entire altcoin market, with forced closures leading to $440 million in liquidations. The leverage used on Solana's perpetual trading platform, especially the practice of retail investors betting on future profits, exacerbated price volatility and ultimately led to price drops.

Meme coins and speculative altcoins: the hardest-hit areas

Although mainstream altcoins like Ethereum, XRP, and Solana have also suffered significant losses, the most affected are the meme coin and micro-cap altcoin markets. The total market cap of the entire meme coin market reached $48.3 billion in the first week of December, but as the fervor waned, the market cap has significantly decreased. Many meme coins, such as Pepe (PEPE), Dogecoin (DOGE), and Shiba Inu (SHIB), have seen their market cap shrink by over 50%.

This reflects changes in traders' risk tolerance over time. During the bull phase of the market cycle, retail investors flocked into various meme coin markets, trying to achieve 10x or even 100x returns on their investments, using significant leverage in the process. However, as the macroeconomic outlook deteriorated and Bitcoin's price fell, these investors fell into a vicious cycle due to the high leverage used when initially purchasing meme coins.

The meme coin issuance platform Pump.fun based on the Solana blockchain set activity records at the beginning of 2025, but since January, its value has shrunk by 72%, from over $1 billion to less than $276 million. This decline reflects a loss of overall market interest.

DeFi TVL: $57 billion in massive fund evaporation

DeFi TVL has fallen from $172 billion to $114 billion, indicating a loss of $57.7 billion in DeFi funds in less than 60 days. This is not merely based on market capitalization: while the drop in cryptocurrency values led to a decrease in locked funds, the decline in TVL (total locked value) is not surprising; it also indicates that users are withdrawing liquidity from these protocols, resulting in capital outflows.

Ethereum continues to lead in the DeFi space among blockchain platforms, accounting for 55% of the total TVL. Despite the significant decline in total TVL, this proportion remains unchanged. Solana, Tron, Bitcoin, and the Binance Smart Chain have all seen shrinkage in DeFi development.

The impact of reduced DeFi activity is enormous. Low TVL means reduced liquidity for decentralized exchanges, leading to increased costs for large transactions, while also lowering the reward rates for liquidity providers, creating a vicious cycle that could lead to more funds withdrawing from the DeFi space. Particularly for the Ethereum network, it may lose its inherent value proposition as a DeFi settlement layer.



What comes next: crash or consolidation?

"The altcoin market is currently at a critical moment. On one hand, given the scale of liquidations up to $440 million, a 34% total locked value (TVL), and 20-40% price fluctuations, it seems that a significant number of vulnerable investors have been eliminated; on the other hand, the market may also enter a consolidation phase." On the other hand, the technical picture is severely damaged. Ethereum has broken key support levels, XRP is testing several-month lows, and Solana's chart shows no signs of having hit the bottom. If Bitcoin continues to weaken, with prices touching the $75,000 to $80,000 range, altcoins may fall again, with market caps shrinking by 20-30%. On-chain indicators are mixed. While whales continue to accumulate specific assets like XRP and Cardano, retail participation has significantly declined, with the number of active wallets and transaction volumes across various altcoin ecosystems sharply decreasing. The meme coin frenzy that swept the market for most of 2025 has turned into a flight to safety, making it difficult for mainstream altcoins to sell, let alone rise. Conclusion: painful lessons from leverage and macro risks. This 'altcoin apocalypse' in December brutally reminds us that the nature of crypto assets is volatility. Despite the liquidation value of approximately $440 million and the 34% crash in total locked value in the DeFi space, which allows us a glimpse into how the market could reverse and cause losses for participants in a challenging macro environment, altcoin market participants still have many questions about the future direction. Although some altcoins like Ethereum and Solana still have solid fundamentals, with their ecosystems developing and growing at least in the short term, the prices of these markets remain subject to external factors unrelated to cryptocurrencies themselves. Unless there are signs of a reversal in Federal Reserve policies or Bitcoin's price breaks the $100,000 barrier, this situation is unlikely to change.

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