What to know:

The crypto market experienced a significant crash, liquidating $16 billion in leveraged bullish bets across major cryptocurrencies.

These massive liquidations are likely to prolong the multi-step bottoming process, involving market makers arbing away price discrepancies.

All bets are off if the U.S.-China trade tensions continue to worsen.

The crypto market experienced its largest liquidation event ever on Friday night U.S. time, forcing out leveraged bullish bets worth $16 billion across bitcoin, ether, XRP, solana, and the broader altcoin market. Several altcoins have crashed between 20% to 40% as the market recoiled.

Naturally, bulls may be wondering whether the recovery could be swift or take time. Understanding the process that follows a crash like this suggests the recovery is likely to be gradual, testing the patience of bullish investors.

"When the market turns like this, there's usually a pretty straightforward playbook for the aftermath," Zaheer Ebtikar, chief investment officer and founder of Split Capital, said on X.

Here's what a typical sequence looks like:

Market bleeds and market makers pause

The initial phase involves the market "bleeding out" or tanking deeper as liquidation orders flood exchanges, pushing prices lower. We saw that happen overnight as several altcoins, including XRP, DOGE, and others, crashed to multi-month lows.

Amid this, market makers, the entities responsible for providing liquidity and ensuring orderly trading, usually step back temporarily to manage their risk and focus on "refilling by first taking out big spot and perp abrs on assets," as Ebtikar noted.