After the largest liquidation in history, where will the crypto market go?

Written by: Michael Chmielewski

Compilation: Vernacular Blockchain

The past week, a historic scene has taken place in the cryptocurrency world. We have witnessed the worst liquidation incident in the field history, with reported figures reaching an astonishing $2.3 billion, and unconfirmed reports show that liquidation amounts may be as high as $10 billion due to excessive API load on the trading platform. The drastic collapse immediately ushered in a dramatic rebound, with Bitcoin and many altcoins rising 20% ​​to 30% in just a few hours. As the dust settles, investors and traders have to face a question: What will happen next?

1. What caused the collapse?

The collapse was triggered by a series of interweaving macroeconomic and geopolitical events. The radical tariff policy re-introduced by the new Trump administration has disturbed global markets. Specifically, the announcement of a 15% tariff on U.S. coal and liquefied natural gas products and a 10% tariff on U.S. crude oil has shaken risky assets like cryptocurrencies like shock waves.

This news became a catalyst for a chain reaction of large-scale liquidation, and the leveraged positions were forcibly closed, further exacerbating downward pressure. The decline is unprecedented, underscoring the vulnerability of a market that relies heavily on leverage.

2. Rebound: Extreme volatility cases

Interestingly, that market that collapsed under liquidation pressure rebounded quickly after news of a temporary tariff moratorium in the United States, Canada and Mexico. Bitcoin surged from $91,000 to $102,000, while altcoins volatility was even more intense, with some even up more than 30%.

This volatility highlights the current market environment and is driven more by headlines than fundamentals. For traders, this is a gold deposit; for long-term investors, it is a test of emotional resilience.

3. Future: Where should we go?

While the worst downside phase may have passed, the market is unlikely to experience a fast V-shaped rebound. Instead, we expect to enter a consolidation period, where price fluctuations may be more intense as the market digests recent events and waits for new catalysts.

4. Key Observation

The structure of altcoins is weak: Many altcoins are still relatively weak in structure and are facing continuous selling pressure, especially retail investors who want to reduce their positions after recent losses.

Retail sentiment: Retail traders generally tend to avoid risks after experiencing major losses, which further suppresses the demand for speculative assets.

Sensitivity to news: The market remains highly sensitive to geopolitical events, especially regarding U.S.-China trade relations and possible monetary policy changes.

5. Which cryptocurrency categories may rise next?

Despite the current resistance, several areas have shown relatively strong strength and may lead the next wave of rebounds:

Real Assets (RWA) Tokens: These tokens have shown resilience in recent volatility. Projects like ONDO and CHEX show strong price movements, suggesting increased investor confidence in Tokens backed by physical assets.

AI-driven crypto projects: Artificial intelligence remains a hot topic, with projects like VIRTUL showing strong fundamentals and growing user adoption. With the continuous development of AI technology, these tokens may have significant room for growth.

Decentralized Finance (DeFi) Agreement: Decentralized Finance projects with a robust income model and strong community support may outperform other projects. Focus on agreements that can continuously incur expenses and innovate in areas such as borrowing, derivatives, on-chain asset management, etc.

Infrastructure Token: Tokens that provide critical infrastructure for crypto ecosystems, such as SOL (Solana), HBAR (Hedera), and HYPE (Hyperliquid), show impressive resilience and may benefit from a rebound in risk appetite sentiment.

Featured Meme Coins: Although the meme coin craze has cooled down, mature names like PEPE with strong community support may see a recovery during the bull market.

6. Actionable investment strategies

Given the current market environment, here are four steps to optimize your cryptocurrency portfolio:

1. Cut down poorly performed assets: Evaluate your holdings and reduce those projects you are no longer optimistic about, especially those that have not rebounded strongly in the recent rebound.

2. Focus on high-conviction projects: Focus on projects with strong fundamentals, clear application scenarios and proven resilience. Diversify investments in potential areas such as real assets (RWA), artificial intelligence (AI) and decentralized finance (DeFi).

3. Maintain adequate stablecoin reserves: Configure 20% to 35% of the portfolio as stablecoins, which allows you to maintain flexibility when future market pullbacks or emerging opportunities arise.

4. Stay patient and develop a strategy: Enter a new position only when a major liquidation event or trend reversal is confirmed. Avoid chasing ups and selling downs, and pay attention to high-risk/high returns opportunities with clear technical and fundamental support.

7. Summary

The crypto market is inherently volatile, but it is this kind of fluctuation that contains opportunities. While the past week has been cruel for many, it also provides valuable lessons about risk management, high-conviction investments, and staying adaptable.

As you move forward, keep your attention to long-term trends, maintain strategic discipline, and be prepared for unexpected situations at any time. The next big opportunity is often around the corner, and the key is to be ready to catch it when it arrives.