Crypto’s wild Friday: billions wiped out as Trump’s tariff threat shocks markets
Crypto world in chaos: massive sell-off driven by politics
Friday marked one of the most shocking days in cryptocurrency history. In mere hours, the global crypto market saw a staggering decline, erasing months of gains. The trigger? A stark warning from U.S. President Donald Trump regarding a potential 100% tariff on all Chinese imports. This announcement sent shockwaves through the financial markets, leaving traders scrambling and forcing a reevaluation of strategies for both individuals and institutions.
How it unraveled: the trigger and the timeline
- Tariff shock ignites panic: The chaos commenced when Trump, reacting to new Chinese export restrictions on rare earth minerals, unveiled plans for sweeping tariffs. This announcement immediately triggered memories of previous trade war volatility.
- Bitcoin’s plunge: Bitcoin, having just come off a record-setting rally, dropped dramatically from above $122,000 to about $113,600. It briefly dipped to lows around $102,000 before managing a small recovery.
- Market-wide selloff: Ethereum, Solana, and nearly every major cryptocurrency mirrored Bitcoin’s downward trajectory. The total cryptocurrency market cap plummeted by over 9% to roughly $3.8 trillion, resulting in over $9.55 billion in investor positions liquidated—the largest liquidation event in crypto history.
- “Longs” wiped out: Most losses stemmed from long positions, where investors were betting on continued growth, losing $8 billion. Conversely, short sellers lost around $1.55 billion as market volatility surged in all directions.
- Ripple effects across markets: Crypto-related stocks were not spared. Robinhood and Coinbase both fell by 5%, while other market players like Circle and MicroStrategy also faced significant drops.
ETF flows: resilience interrupted
- ETF momentum halts: U.S. Bitcoin ETFs had enjoyed a remarkable nine-day stretch of positive inflows, propelled mainly by BlackRock’s IBIT fund, which absorbed over $4.2 billion in the month. However, this streak came to a sudden halt with outflows of $4.5 million, indicating that even institutional investments are not insulated from macroeconomic shocks.
- BlackRock’s “shock absorber” title tested: Analysts had praised IBIT for stabilizing the ETF sector during the recent rally, but even this towering figure faced scrutiny as risk-off sentiment took hold.
Individual coins: flash crashes and rare recoveries
- Dogecoin’s drama: In a particularly volatile moment of the day, Dogecoin experienced a staggering 50% flash crash, dropping from $0.22 to $0.11 before bouncing back to the $0.19–$0.20 range. Whale activity and ETF flows helped stabilise the token after the initial panic.
- Ethereum and Solana: Both coins fell sharply, with Ethereum nearing $1.26 billion in liquidations, while Solana plummeted along with other altcoins.
Trading floors and exchanges: scenes from the storm
- Major exchanges strained: The HTX platform documented one monumental bitcoin liquidation exceeding $87 million, marking one of the largest single trades in crypto derivatives history.
- Liquidations across the board: The forced sell-offs led to “cascading liquidations”—a chain reaction where falling prices prompted margin traders to close losing positions en masse, further amplifying volatility.
Why this time feels different
Experienced players in the digital asset realm have witnessed sharp corrections before, but the velocity and scale of this week’s crash have broken records. Notably, the sell-off impacted not only retail traders but also institutional investors caught off-guard by sudden policy shifts. The convergence of political and financial shocks has been unprecedented, forcing both traditional and digital markets into decline, highlighted by significant drops in crypto-linked stocks and even a shaky U.S. dollar.
The macro lens: geopolitics and the new market regime
- Geopolitics now controls the narrative: Until now, crypto markets responded mainly to internal news—such as ETF approvals and protocol upgrades. However, the recent geopolitical developments have sharply reminded all involved that digital assets can be vulnerable to global risk sentiment.
- The China dilemma: China’s clampdown on rare earth exports has targeted Western manufacturing, causing a series of retaliatory responses. With escalating tariff threats, market players are compelled to reassess trade risks and the possibility of additional regulatory actions.
Looking ahead: what traders, investors, and institutions should watch
- ETF flows as a barometer: Keep an eye on institutional sentiment. Renewed inflows into Bitcoin and Ethereum ETFs may signal a rebound in confidence—or further outflows could deepen the downturn.
- Policy pivots: Trump mentioned potential negotiations, indicating tariffs might be lifted if China alters its rare earth policies before November 1. Anticipate fluctuations around any news of diplomatic developments.
- Liquidation zones: With major coins breaking through technical support levels, monitor exchange liquidation data and critical price points as indicators of possible recovery or further panic.
- Altcoin risk: The “alt season” narrative has been undermined by forced liquidations. Watch how leading altcoins manage recoveries or whether they continue to suffer as a reflection of risk appetite.
Final thoughts: adapt and survive
This crash serves as a wake-up call. In a landscape where digital assets are increasingly important to global finance, real-world shocks can turn markets upside down almost instantly. Today, every crypto trader must embrace macro perspectives. In such turbulent times, flexibility and caution are more valuable than sheer holding determination.
Brace for more upheavals and keep in mind that within each crisis lies both risk and opportunity.
