Crypto markets faced a severe downturn on Friday following the announcement of new tariffs on Chinese imports by US President Donald Trump. The move reportedly sent shockwaves through an already volatile market, exacerbated by a recent surge in leveraged trading that ultimately resulted in billions of dollars’ worth of long positions being liquidated.
The sudden rise in tariffs—set at a staggering 100%—led to immediate and drastic declines in the values of major cryptocurrencies. Within just half an hour of the announcement, Bitcoin plummeted nearly 10%, dropping briefly below the $105,000 mark. Ether followed suit, declining over 12% to around $3,500. Other coins, such as Solana, Hyperliquid, and Sui, experienced even steeper drops, with prices falling by 17%, 45%, and 70% respectively.
This market crash was underpinned by a substantial increase in leveraged trading in the days leading up to Friday’s announcement. Data from Coinglass indicated that open interest—a measure of leveraged positions—had nearly tripled for Ethereum since the start of the year, rising from around $23 billion to just under $60 billion just before the crash. Bitcoin and Solana also saw open interest grow significantly, demonstrating a broad trend of increasing risk exposure among traders.
The turmoil in the crypto market seems to have been precipitated by China’s announcement the day before, detailing further restrictions on the export of rare earth elements critical for technology manufacturing. In a swift response, Trump not only introduced new tariffs but also indicated he would implement export controls on essential software by November 1.
As crypto values tumbled, exchanges took emergency measures, including auto-deleveraging, which involved closing profitable short positions to mitigate the risk of accumulating bad debt. According to CoinGlass data, the crash led to approximately $3.7 billion in liquidations on Bitcoin long positions alone, alongside over $600 million in short position liquidations within one hour. Ethena’s synthetic dollar saw a dramatic loss of its peg to the US dollar, which further signaled investor anxiety, contributing to approximately $226 million in liquidated long positions on that platform.
Amid the chaos, other signs of stress emerged as well. The USDC stablecoin dipped below its intended value of one dollar, while Tether began trading at a slight premium, raising concerns regarding liquidity and market stability.
Despite the extreme volatility, some investors maintained a long-term perspective. Simon Dedic, founder of Moonrock Capital, noted that the market’s rapid decline felt unprecedented, particularly due to its lack of a clear fundamental cause. He speculated that the sudden drop might have been triggered by a technical glitch at a major exchange or market maker rather than organic market forces.
As the crypto market reflects growing maturity, Friday’s events underscore its continued vulnerability to external pressures and speculative trading practices, leaving many investors wondering about future stability amid ramping risks.
