SHIB's Paradox: Exchange Outflows and Liquidation Waves Signal a Leverage Reset, Not a Sell-Off

The Shiba Inu (SHIB) market in late 2025 presents a paradox: massive exchange outflows and asymmetric liquidation waves coexist with resilient price action, defying traditional bearish narratives. While the token's 14.15% drop in December 2025 has reinforced its reputation as a seasonal weak performer, deeper analysis of on-chain and derivatives data reveals a structural shift. These metrics suggest a leverage reset-a recalibration of risk exposure and positioning-rather than a broad-based sell-off. This reset, driven by retail and institutional behavior, hints at a potential inflection point for SHIB's market structure and sentiment.

Exchange Outflows: A Signal of Accumulation, Not Panic

Data from late 2025 shows unprecedented outflows of SHIB from centralized exchanges. Over 125 billion tokens were withdrawn in 2025 alone, with a single whale moving 53.59 billion SHIB from Coinbase on December 15 after a year of dormancy according to reports. A subsequent net outflow of 118.6 billion tokens further underscored this trend, coinciding with a 4% price increase to $0.000007238. Such outflows typically signal long-term accumulation, as investors transfer tokens to self-custody wallets rather than depositing them for trading.

Critically, these movements contradict the behavior of sellers, who usually increase exchange deposits to facilitate short-term trading or liquidation. Even Santiment's report of 1.06 trillion SHIB added to exchange reserves on December 9 appears to be an outlier, likely tied to a single large deposit rather than a reversal of the broader outflow trend. The persistence of net outflows-despite SHIB's price weakness-suggests market participants are preparing for a long-term hold, not a capitulation.

Liquidation Waves: Buyers Absorb Forced Selling

SHIB's derivatives market has also exhibited unusual dynamics. On December 26, the token defied expectations by maintaining gains despite a 5,000% imbalance in long liquidations, with $10,590 in long positions liquidated versus only $213.72 in short positions. Similarly, a 24-hour period on December 24 saw $103,730 in long liquidations versus a mere $895 in short liquidations. These figures highlight the dominance of leveraged long positions, yet the price held firm, indicating that spot buyers absorbed the forced selling.

This behavior is not typical of a bearish capitulation. In a standard sell-off, liquidation cascades would drive prices lower as leveraged positions unwind. Instead, SHIB's price resilience suggests a coordinated or opportunistic buying response, potentially from retail investors or strategic market participants. The asymmetry in liquidation risks-where longs face far greater exposure than shorts-further reinforces the idea of a leverage reset, as traders adjust their risk profiles in anticipation of volatility.

On-Chain Burns and Volatility: A Double-Edged Sword

SHIB's burn rate surged by 859% in late 2025, removing 12.91 million tokens from circulation, primarily through contributions from CEX.io and other exchanges. While token burns reduce supply and theoretically support price, they also introduce volatility by amplifying derivative market movements. The interplay between burns and leveraged positions has created a feedback loop, where supply reductions coincide with sharp price swings and trader behavior shifts.

Despite these burns, SHIB's price remains below key moving averages, with momentum indicators in oversold territory. However, the token has not broken down decisively, a pattern observed in previous December months. This historical context-combined with recent buying pressure-suggests that the market is testing support levels rather than entering a terminal decline.

Sentiment and Structure: A Leverage Reset, Not a Sell-Off

The confluence of exchange outflows, asymmetric liquidations, and on-chain burns points to a leverage reset. Retail and institutional investors are reducing exposure to leveraged longs, while spot buyers are stepping in to stabilize the price. This reset is not a sign of capitulation but a reallocation of risk in a volatile environment.

For investors, the key takeaway is that SHIB's market structure is evolving. The token's historical December weakness persists, but the recent resilience amid outflows and liquidations indicates a shift in sentiment. If this trend continues, SHIB could transition from a speculative asset to one with more defined support levels and institutional-grade positioning.

Conclusion

SHIB's paradox lies in its ability to defy traditional bearish signals while exhibiting structural changes that suggest a leverage reset. Exchange outflows reflect accumulation, liquidation waves reveal buyer resilience, and on-chain burns add a layer of volatility that could catalyze a bullish reversal. For now, the market remains in a delicate balancing act, but the data points to a recalibration rather than a collapse. Investors should monitor further outflows and liquidation patterns for confirmation of this structural shift.