Cryptocurrency markets collapsed following President Donald Trump’s threat in early October to impose a 100% tariff on imports from China to America, demonstrating the volatility of cryptocurrencies in uncertain markets.
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As the roller coaster ride of Trump’s controversial 2025 trade policies continues, what should investors expect (and prepare for) next from the crypto market?
Friday October 10 saw a devastating drop in the value of cryptocurrencies, costing billions of dollars in losses. The reason? Trump’s threat to hit China with 100% tariffs has sparked panic in the crypto market. Investors, worried about their riskier holdings (such as cryptocurrencies) in the face of potential market instabilities related to U.S.-China tariffs, began selling en masse and created what data analytics site CoinGlass called “the largest liquidation event in crypto history” – an unprecedented sell-off with a total liquidation of $19.13 billion.
Additionally, as CNN explained, the crash was made worse by the fact that many crypto traders were extremely “leveraged” – a common (but very risky) practice in crypto trading in which investors borrow money to increase the amount of their crypto bets. When cryptocurrency prices fall, leveraged investors face catastrophic losses; many of these leveraged investors led the rush to sell after Trump’s tariff threat. As a result, the crypto market cap increased from $4.1 trillion to $3.6 trillion.
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Just days after the crash, market capitalization began to recover rapidly. Additionally, on October 27, it was reported that Trump and Chinese President Xi had made great strides toward a new trade relationship, which could lead to a reduction in the many tariffs between the two countries. As Yahoo Finance reports, crypto markets jumped 3 to 5%.
Unfortunately, this is unlikely to be the last such event even in the near future. When uncertainty or instability threatens markets – and 2025 has been a year almost entirely defined by economic uncertainty and instability – crypto is often the first asset abandoned by wayward investors, leading to stunning stock market crashes like the one in October.
“When the economy is uncertain, cryptocurrency prices can move sharply,” John Paton, marketing director and public relations manager at Kimura London & White LLP, told GOBankingRates. “Many investors view crypto as a riskier place to keep their money, which is why they often sell quickly when they are worried. This reminds investors to stay realistic. Prices can rise and fall quickly. Major world events can make these declines even faster.”
