Crypto Market May Face Extended Recovery Time Following Major Liquidation Event, Analyst Predicts

The crypto market may take over two months to fully recover if past patterns hold, according to analyst Matthew Hyland. Following massive liquidations in early February, he suggests that altcoins might not return to their December highs until at least April. This prediction follows a tumultuous period sparked by geopolitical tensions and market volatility.

A Tough Road to Recovery

On February 3, the cryptocurrency market experienced its largest liquidation event in history, with over $2.24 billion wiped from the markets within just 24 hours. The massive sell-off was triggered by escalating concerns over a potential trade war after former US President Donald Trump threatened 25% tariffs on imports from Canada, Mexico, and China. The announcement fueled fears of an economic downturn and created ripple effects across global financial markets, including the crypto space.

Crypto commentators, including Bybit CEO Ben Zhou, suggest that the actual liquidation figure could be even higher, estimating it to be closer to $8-10 billion. The magnitude of the sell-off underscores the heightened uncertainty and volatility in the market.

Bitcoin’s Struggles

Bitcoin (BTC) was not immune to the market turbulence. On February 3, the flagship cryptocurrency dropped to $92,584, falling below the $100,000 mark for the first time since late January. Although Bitcoin briefly rose above $102,000 the following day, it has since retraced, currently trading around $97,570 at the time of publication, according to CoinMarketCap data.

Hyland points out that this dip signals a potential "low" for Bitcoin, but warns that a full recovery is unlikely to occur quickly. He references previous events, such as the COVID-19 crash in 2020 and the collapses of Terra and FTX in 2022, both of which took months to fully recover from.

Historical Precedents for Long-Term Recovery

Hyland’s forecast for a slow recovery is based on patterns seen in prior major market disruptions. In 2020, Bitcoin saw a dramatic 47% drop in value during the early days of the COVID-19 pandemic, plummeting from its March highs to as low as $5,017. Despite this sharp fall, the market rebounded, and by August, Bitcoin had surged above $11,000.

Similarly, the cryptocurrency market struggled to regain its footing after significant setbacks in 2022. The collapse of the Terra blockchain in May and the high-profile failure of the FTX exchange in November resulted in widespread market turmoil, with recovery taking several months.

Hyland cautions that a rapid, V-shaped recovery, similar to what occurred in 2020, is unlikely. "Even a V-shape like 2020 took weeks, with many dips along the way," he noted.

What’s Next for the Crypto Market?

The timeline for a full recovery will depend on various factors, including broader market sentiment, geopolitical developments, and potential regulatory actions. Hyland’s analysis suggests that, while some recovery is expected, it will take time—possibly well into April—before altcoin prices return to the levels seen in December 2022.

For investors, Hyland advises tempering expectations and preparing for a prolonged recovery process. The crypto market has proven to be resilient in the past, but it has also shown how quickly it can be shaken by external events. As the market moves through this latest period of uncertainty, investors will need to remain patient and be prepared for potential volatility in the months ahead.

In the coming weeks, all eyes will be on how Bitcoin and other altcoins respond to the aftershocks of this massive liquidation event and whether the market can regain its upward momentum