Bitcoin is back above $114,000 after the biggest crypto liquidation in history. But a choppy road lies ahead for investors.

By Frances Yue

The Friday selloff triggered a 'last resort' mechanism on some exchanges to prevent platform insolvency

Both crypto and stocks rebounded on Monday after the Friday selloff.

Major cryptocurrencies rebounded on Monday, after the space saw a $19 billion wipeout last Friday - the largest liquidation in crypto's history. The selloff in crypto, like the selloff in U.S. stocks, was triggered by concerns about the potential ramp-up of global trade tensions, after President Donald Trump announced an additional 100% tariff against China.

Bitcoin (BTCUSD) rose 0.5% over the past 24 hours to around $114,683 Monday morning, up 6.9% from a Sunday low at $106,770, according to CoinDesk data. The largest cryptocurrency by market cap was still 9.2% away from its record high at $126,272, reached on Oct. 6, while up 22.6% this year, according to Dow Jones Market Data.

While major cryptocurrencies have recouped some losses from the selloff, the elevated volatility suggests a choppy road ahead.

"While investors appear willing to look through the disruption, confidence could be tested again should external shocks resurface," Joel Kruger, market strategist at LMAX Group, wrote to MarketWatch in emailed comments.

What happened

After Trump said Friday that he would impose new tariffs of 100% on imports from China and impose export controls on "any and all critical software," effective Nov. 1, risky assets, including cryptocurrencies, nosedived.

"Liquidity evaporated across crypto futures as market makers pulled quotes to avoid breaching risk limits," Nick Forster, founder of crypto-options platform Derive.xyz, wrote in a Monday note. Essentially, market makers were forced to pare back their quoted offerings because there were too many risks in the market.

"With order books thinned out, forced liquidations and panic selling had an outsize impact on price, fueling a self-reinforcing cascade of liquidations and accelerating the flash crash," Forster noted. Some traders with large leveraged positions in crypto derivatives, such as perpetual futures, saw their holdings liquidated as exchanges scrambled to remain within risk limits. Perpetual futures are a type of contract that lets investors bet on crypto price movements with leverage without an expiration date

What's worse, the selloff triggered the activation of auto-deleveraging systems on some crypto derivative exchanges, inspiring a wave of complaints from traders.

As a result, more than $19 billion worth of positions were liquidated in crypto on Friday, the largest single-day liquidation in the history of the space, according to data from digital-asset data-analysis platform Coinglass.

Auto deleveraging is a risk-management mechanism used by some crypto-derivatives exchanges, especially those offering perpetual futures. The mechanism automatically reduces even profitable traders' positions to cover losses from liquidations.

The mechanism was described as a "last resort" by many, including Doug Colkitt, founder at decentralized exchange Ambient Finance. It has previously only been used to maintain platform solvency and avoid cascading losses when the insurance fund set by exchanges cannot cover the losses, Colkitt wrote in a thread on X on Friday.

"Think of it like being on a hot streak in poker. You show up to a casino and crush everyone at the table. And then you go to the next table and crush everyone there. And then the next table. Eventually everyone else at the casino runs out of chips. That's ADL," Colkitt noted.

What's next

The recovery of crypto and stocks on Monday suggested that Friday's selloff was driven more by liquidity issues than by fundamentals, LMAX Group's Kruger said.

Still, the setup for crypto remains vulnerable. The uncertainty around the U.S.-China trade situation has brought new uncertainty into the global outlook, Kruger said. Meanwhile, Friday's selloff has revived concerns over the robustness of the crypto infrastructure.

In addition, the selloff has driven up volatility across all expiries of bitcoin options, while sharp selloffs typically only raise the volatilities of short-dated options, according to Forster. It suggests that traders are expecting more turbulence ahead, Forster noted.

U.S. stocks traded up Monday morning, with the Dow Jones Industrial Average DJIA up over 600 points, or 1.4%. The S&P 500SPX was up 1.7% and the Nasdaq composite COMP went up 2.2%.

-Frances Yue

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10-13-25 1330ET