Crypto markets crashed in early October as a result of President Donald Trump’s threat that he would impose 100% tariffs on imports from China to the US, highlighting the volatility of cryptocurrencies in uncertain markets.
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As the rollercoaster of Trump’s controversial 2025 trade policies continues, what should investors expect (and prepare for) next from the crypto market?
What happened
Friday, October 10 saw a massive drop in the value of cryptocurrencies, leading to billions of dollars in losses. The reason? Trump’s threat to impose 100% tariffs on China created panic in the crypto market. As investors panicked about their risky holdings (like crypto) due to potential tariff-related market instabilities between the US and China, they began selling in large numbers and led to what data analysis site CoinGlass called “the largest liquidation event in crypto history” – an unprecedented selloff with total liquidations of $19.13 billion.
Additionally, as CNN detailed, 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 volume of their crypto bets. When crypto prices fall, leveraged investors face huge losses; Many such profit-taking investors led the selling stampede following Trump’s tariff threat. As a result, the crypto market capitalization fell from $4.1 trillion to $3.6 trillion.
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where things stand now
Just a few days after the crash, the market cap began to recover rapidly. Additionally, on October 27, it was reported that Trump and China’s President Xi had made considerable progress toward new trade relations, potentially leading to the rollback of many tariffs between the two countries. Crypto markets are up 3%-5% as a result, Yahoo Finance reports.
What does this mean for you?
Unfortunately, this is not likely to be the last such incident in the near future. When uncertainty or volatility threatens the market – and 2025 has been a year defined almost entirely by economic uncertainty and instability – crypto is often the first asset dumped by stingy investors, leading to shocking market crashes like the one in October.
“When the economy is uncertain, crypto prices can rise sharply,” John Patton, marketing director and head of public relations at Kimura London & White LLP, told GeoBankingRates. “Many investors view crypto as a risky place to keep their money, so they often sell rapidly when they are concerned. This is a reminder to investors to remain realistic. Prices can rise and fall rapidly. Major global events can cause those declines to occur even more rapidly.”
Nick Pukrin, CEO and co-founder of The Coin Bureau, agreed, speaking with GeoBankingRates: “Markets never like uncertainty – whether it’s crypto or equity markets. The unprecedented selloff was a clear signal that cryptocurrencies are a part of the broader financial ecosystem and, therefore, are affected by the same macro drivers.
“At the same time, however, it was a stark reminder that, as the only asset that trades 24/7, crypto is naturally more sensitive to periodic announcements than traditional markets. For investors, it is a lesson about the dangers of leverage in a market that is as uncertain and as close to the top of the cycle as it is now.”
What does this mean for crypto investors? Large crypto dumps are likely to continue, especially as Trump continues to use tariff threats to renegotiate America’s trade relationships with the rest of the world. It may be more prudent to avoid hot crypto tips and instead make smart moves in a recession.
Or, as Pukrin said, “Given the market conditions, it is advisable to think twice and consider all the risks before making high-leverage trades.”
Editor’s note on political coverage: GOBankingRates is non-partisan and strives to objectively cover all aspects of the economy and offer balanced reporting on politically focused finance stories. You can find more coverage on this topic here GOBankingRates.com,
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This article originally appeared on GOBankingRates.com: How Trump’s tariffs crashed the crypto market – what it means for you
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