BTC, ETH, XRP, SOL Face Gradual Bottom Formation After Record $16B Crypto Liquidation

The cryptocurrency market witnessed its largest liquidation event in history during Friday night U.S. trading hours, eliminating $16 billion in leveraged bullish positions across major digital assets including Bitcoin (BTC), Ethereum (ETH), XRP (XRP), Solana (SOL), and the broader altcoin sector. Numerous alternative cryptocurrencies plummeted 20-40% as market sentiment deteriorated significantly. Market participants are now questioning whether the recovery will be rapid or prolonged. Analysis of post-crash market dynamics indicates the rebound process will likely be gradual, testing the patience of optimistic investors. "When markets experience such dramatic turns, there's typically a clear sequence of events that follows," noted Zaheer Ebtikar, Split Capital's Chief Investment Officer and founder, in a social media post. The market recovery process unfolds through several distinct phases: **Initial Market Decline and Market Maker Withdrawal** The first stage involves extended price declines as liquidation orders overwhelm exchange order books, driving prices to lower levels. This was evident as multiple altcoins including XRP and DOGE plunged to multi-month lows. During this phase, market makers - entities responsible for maintaining market liquidity - typically reduce their activity to manage risk exposure and focus on arbitrage opportunities between spot and perpetual markets, delaying immediate price recovery. **Market Data Normalization** This phase occurs when trading infrastructure and data feeds stabilize following extreme volatility. During market crashes, exchange systems and real-time data providers often experience delays or outages. Once data reliability improves, market makers and institutional traders begin absorbing substantial sell orders to reestablish market balance. These sophisticated participants capitalize on prioritized liquidation orders, initiating bargain hunting activities. Given the unprecedented scale of recent liquidations, this absorption period could extend across multiple trading sessions. **Gradual Market Stabilization** During this stage, dealers and market makers begin unwinding long positions acquired at discounted prices during the liquidation absorption phase. "Once dealers establish long positions, they start reducing spot and perpetual exposure as markets approach equilibrium. This typically marks a local price peak," Ebtikar explained. Assets with constrained supply dynamics often demonstrate stronger performance characteristics during this phase. The stabilization process tends to decelerate during weekends when spot ETF markets are closed, reducing overall market liquidity. Lower liquidity conditions make large position unwinding more challenging and time-consuming for market participants. **Establishing Market Foundation** Eventually, markets establish a support level, entering a more predictable trading range while investor confidence gradually recovers from the recent downturn. In summary, the massive liquidation event will likely extend the multi-phase bottoming process, characterized by strategic acquisition of liquidated positions, weekend liquidity constraints, and price discovery mechanisms. It's important to note that ongoing macroeconomic concerns, particularly U.S.-China trade tensions, could significantly impact this recovery timeline if geopolitical risks persist.