The crypto market just weathered its largest liquidation event ever on Friday night, U.S. time, wiping out $16 billion in leveraged bullish bets across Bitcoin ($111,657.56), Ether ($3,836.70), XRP ($2.5041), Solana ($188.27), and other altcoins. Several altcoins plunged by 20% to 40% as a result.
The sheer scale of this crash suggests that any recovery will be gradual rather than swift, testing the patience of investors. According to market analysts like Zaheer Ebtikar of Split Capital, a predictable four-step sequence typically unfolds after an event like this:
- Market Bleeds and Market Makers Pause: The initial phase involves prices sinking as liquidation orders flood exchanges. Crucially, market makers—the entities providing liquidity—temporarily step back to manage risk. They focus on arbitrage plays (taking out "spot and perp abrs") to correct price differences between spot and futures markets, which prevents an immediate bounce.
- Data Feeds Stabilize: High volatility during the crash often leads to delays or outages in the technical systems and data feeds used by traders. Once these systems become reliable again, market makers and large traders can start absorbing the major sell orders (liquidation orders) to restore balance and engage in bargain hunting. Given the massive size of the recent liquidations, this absorption phase is expected to take several days.
- Market Stabilization and Dealer Unwind: Dealers and market makers who bought assets at bargain prices during the crash will begin to close out (unwind) their long positions for profit. This process, which creates a temporary local price peak, is naturally slow, especially over a weekend when the lack of spot ETF activity and lower overall liquidity makes it harder to unwind large positions without causing significant price swings.
- Market Finds a Floor: Eventually, the strategic buying, absorption, and slow unwinding process concludes, allowing the market to settle into a stable range where investor confidence can begin to rebuild.
In conclusion, the record-breaking liquidations observed will prolong this multi-step bottoming process, which involves strategic buying by market makers, a challenging weekend for liquidity, and the establishment of new price anchors. Furthermore, the entire recovery timeline remains subject to headline risks, such as continued U.S.-China trade tensions.
October 2025, Cryptoniteuae