Panic over a potential US-China trade war led to a historic crypto market crash, followed by a sharp recovery.
Threats of 100% Tariffs Spark Market Chaos
On October 10, crypto markets crashed after President Trump threatened 100% tariffs on Chinese imports. This sparked investor fears of a renewed trade war between the US and China. Along with stocks, cryptocurrencies suffered significant losses — the S&P 500 dropped $2.5 trillion, while the crypto market saw the largest liquidation in history — nine times larger than the previous record.
Whales and Leverage Trading Accelerate the Decline
The selloff began as early as 9:30 AM ET, before Trump’s first tweet at 10:57 AM. Large traders, known as “whales,” had already started opening short positions. Between 4:30 PM and 4:49 PM ET, one whale purchased over $23 million in shorts.
The ratio of liquidated longs to shorts was 7:1. Over 80% of the 1.6 million liquidated traders were leveraged long. Shorts were sold down to the 5:20 PM bottom, triggering a sharp V-shaped market rebound.
This intense volume led to Bitcoin’s first-ever $20,000 candlestick and a $380 billion drop in market capitalization before recovery began.
Misunderstanding Between Trump and Xi Jinping
The crash stemmed from a misinterpretation of China’s new export rules on rare earth elements announced on October 9. Although these weren’t a full ban, but rather regulatory requirements, Trump interpreted them as a complete halt on exports.
In response, he threatened new tariffs. China initially criticized the US but quickly clarified that the measures were limited, not total restrictions.
Don’t worry about China, everything will be fine! The highly respected President Xi just had a bad moment. He doesn’t want a depression for his country, and neither do I. We want to help China, not hurt it. — Donald Trump
This demonstrates that the panic was the result of a communication breakdown, not an actual policy shift.
Crypto Recovery and Capital Inflows
The crypto market is already showing signs of recovery, with total market capitalization reaching $3.82 trillion — up 1.75%.
- Bitcoin is trading above $115,000, up over 3% in the last 24 hours
- Ethereum has surged to $4,171, up nearly 9%
- Altcoins such as BNB, XRP, and Solana are also posting strong gains
Since the 5:30 PM ET bottom, over $550 billion has returned to the crypto market.
Conclusion
The historic crypto crash proved to be short-lived, driven by a misunderstanding rather than a real threat. Despite the panic, the market responded maturely and recovered quickly. Investors are once again looking optimistically at the future of cryptocurrencies.
Frequently Asked Questions
Find answers to the most common questions below.
It was triggered by President Trump’s misinterpretation of China’s rare earth export rules, which he believed to be a total ban, prompting threats of 100% tariffs.
The crypto market lost $380 billion during the crash but regained over $550 billion shortly after, with total market cap rising above $3.82 trillion.
Bitcoin rose above $115,000 with a 3% gain, Ethereum surged nearly 9% to $4,171, and altcoins like BNB, XRP, and Solana also saw strong gains.
This article is for general informational purposes only and is not intended to be, and should not be construed as, legal or investment advice. Crypto-assets are highly volatile, so only invest funds that you are willing to lose and use your own research and risk management.
