Crypto markets crashed as a result of President Donald Trump’s threat in early October that he would impose a 100% tariff on imports from China to America, demonstrating the volatility of cryptocurrency in uncertain markets.
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As the rollercoaster of Trump’s controversial 2025 trade policies continues, what should investors expect next (and prepare for) from the crypto market?
What Happened
Friday, Oct. 10, saw a devastating plunge in cryptocurrency value, costing billions of dollars in losses. The reason? Trump’s threat to hit China with 100% tariffs spurred a crypto market panic. Investors, nervous about their riskier holdings (such as crypto) in the face of potential tariff-related market instabilities between American and China, began to sell in droves and created what data analysis 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 elaborated, the crash was worsened by the fact that many crypto traders were extremely “levered” — a common (but very risky) practice in crypto trading in which investors borrow money to increase the amount of their crypto bets. When crypto prices drop, leveraged investors face catastrophic losses; many such leveraged investors led the sell-off stampede after Trump’s tariff threat. As a result, crypto market capitalization dropped from $4.1 trillion to $3.6 trillion.
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Where Things Stand Now
Just days after the crash, the market cap began recovering quickly. Further, on Oct. 27, it was reported that Trump and China’s President Xi had made a great deal of progress towards a new trade relationship, potentially leading to a rollback in the many tariffs between the two nations. As reported by Yahoo Finance, crypto markets have surged 3%-5% as a result.
What Does This Mean For You?
Unfortunately, this is unlikely to be the last event of its kind, even in the near future. When uncertainty or instability threaten the markets — and 2025 has been a year almost totally defined by economic uncertainty and instability — crypto is often the first asset that is dumped by skittish investors, leading to staggering market crashes like October’s.
“When the economy is uncertain, crypto prices can move sharply,” John Paton, marketing director and head of public relations at Kimura London & White LLP, told GOBankingRates. “Many investors see crypto as a riskier place to keep their money, so they often sell fast when they get worried. This is a reminder for investors to stay realistic. Prices can rise and fall quickly. Big global events can make those drops happen even faster.”
Nic Puckrin, CEO and co-founder of The Coin Bureau, concurred while speaking with GOBankingRates: “Markets never tend to like uncertainty — whether it’s crypto or equity markets. The unprecedented sell-off was a clear sign that cryptocurrencies are a part of the wider financial ecosystem and, therefore, affected by the same macro drivers.
“At the same time, though, it was a stark reminder that, as the only asset that trades 24/7, crypto is naturally more vulnerable than traditional markets to out-of-hours announcements. For investors, this 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 that mean for crypto investors? Large crypto dumps are likely to continue, especially as Trump continues to use tariff threats to forcefully renegotiate America’s trade relationship with the rest of the world. It may be more prudent to avoid hot crypto tips and instead internalize smart moves in a recession.
Or, as Puckrin put it, “Given the market conditions, it pays to think twice and consider all the risks before committing to trades involving high leverage.”
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on 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
