The 22-year-old midfielder is out of contract at the end of the season and has already spoken of his desire to play in the Premier League.
Reds boss Brendan Rodgers is a confirmed admirer of Holtby, but the German international is likely to snub a move to Anfield in favour of joining Arsenal, because his father is a massive Everton fan.
Holtby has impressed Gunners boss Arsene Wenger this season in the recent Champions League matches against the Bundesliga side, and the Frenchman is ready to make a move for the Schalke star in the New Year, as will Liverpool chief Rodgers.
The player has vowed to make a decision during the German league's five-week winter break – but it looks increasingly unlikely that Schalke will be able to hold on to him.
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