Crypto Market Plunges After Trump Announces 100% China Tariff

Why Crypto Is Crashing Today and What Could Happen Next: Key Factors Driving Market Turmoil

The global cryptocurrency market has experienced one of the most dramatic sell-offs in its history, with over $9 billion in leveraged positions liquidated in a single day. This unprecedented market shock wiped out more than $300 billion in total market capitalization, dropping the crypto sector to $3.83 trillion. Traders and investors alike were left scrambling, asking the same urgent question: why is crypto crashing today, and is a recovery on the horizon?

Trump’s 100% Tariff Sparks Market Panic

The immediate catalyst behind today’s dramatic crypto decline was U.S. President Donald Trump’s announcement of a 100% tariff on imports from China, effective November 1, 2025. This move followed Beijing’s tightening of rare-earth mineral export controls, which Trump labeled a “hostile act” against U.S. interests. In a post on Truth Social, he declared sweeping export restrictions on “any and all critical software,” signaling a potential escalation in trade tensions that rattled markets worldwide.

Source: Truth Social 

Within minutes of the announcement, major U.S. stock futures plunged. S&P 500 futures dropped 3.5%, wiping out $2.5 trillion in projected market value in just six hours. The S&P 500 eventually closed down 2.7%, marking its largest single-day decline since April. For the crypto market, which often acts as a high-beta, risk-sensitive asset, the repercussions were immediate. Bitcoin fell 7%, dropping from $121,420 to $104,953 before stabilizing at $112,627. Ethereum slid 12% to $3,819.82, Solana tumbled 16% to $186.50, and XRP fell 14% to $2.42.

The sell-off underscores a broader lesson: crypto markets, despite their decentralized nature, remain highly susceptible to macroeconomic and geopolitical shocks.

Source: X

Federal Reserve Chair Powell’s Silence Intensifies Uncertainty

Adding fuel to the market fire was the lack of commentary from Federal Reserve Chair Jerome Powell ahead of the October 29 FOMC meeting. Investors had hoped for hints regarding potential interest rate cuts, which could provide relief to risk assets. Powell’s silence left markets guessing, contributing to panic selling.

The Fear and Greed Index, a widely watched measure of market sentiment, plummeted from 64 (Greed) to 27 (Fear) in a single day. Historically, such extreme fear levels can signal panic-driven selling. Yet contrarian investors often interpret these conditions as potential buying opportunities if macroeconomic signals stabilize.

Ongoing Hacks and Security Breaches Deepen Market Anxiety

Market sentiment was further undermined by recent high-profile security incidents affecting both centralized and decentralized platforms. Notable events included hacks on BNB Chain, PancakeSwap account compromises, and alerts related to Binance CEO Changpeng Zhao’s accounts.

These breaches have heightened fears around digital asset security and regulatory oversight. In a market already shaken by geopolitical risk and macro uncertainty, such security incidents amplify panic and accelerate outflows from crypto holdings, especially from leveraged traders.

The Role of Leverage in Amplifying the Sell-Off

One of the key reasons for the record $9 billion in liquidations is the pervasive use of leverage in crypto trading. Leveraged positions magnify both gains and losses. When a macroeconomic shock hits, as with the Trump tariff announcement, forced liquidations cascade, triggering a self-reinforcing cycle of price declines.

Data from Coinglass indicated that this was the largest single-day liquidation in recent memory, with over 1.6 million traders impacted. Even large “whale” accounts faced significant losses, demonstrating that no market participant is immune during extreme volatility.

Bitcoin and Altcoins: How Individual Assets Were Affected

Bitcoin, the benchmark for the broader crypto market, demonstrated extreme sensitivity to macro events. After dipping below $105,000, BTC rebounded slightly but remains under pressure. Ethereum and Solana experienced even sharper declines, reflecting their higher beta relative to Bitcoin. XRP and other altcoins also faced steep losses, with liquidity drying up rapidly across both centralized exchanges and DeFi platforms.

Source: CMC

Despite the chaos, a few assets displayed resilience. Niche tokens and stablecoins absorbed inflows as investors sought safe havens, highlighting that diversification within crypto may mitigate some downside risk during periods of extreme volatility.

Why This Crash Could Signal a Structural Reset

Analysts argue that the current liquidation event may mark a structural reset for the crypto market. After months of rising leverage and sustained bullish sentiment, the sudden macro shock forced traders to de-risk positions. Such resets often clear speculative excesses and create conditions for more sustainable growth in the medium term.

Historically, major corrections like these—though painful in the short term—have often paved the way for renewed institutional interest and more disciplined trading behavior. Market participants who remain focused on fundamentals and long-term adoption may find attractive entry points amid this turmoil.

Upcoming Catalysts for Recovery

Several upcoming events could reshape sentiment in the crypto market. Regulatory approvals, such as Solana and XRP ETF decisions by the U.S. Securities and Exchange Commission (SEC), could inject renewed optimism. Additionally, the October 29 FOMC meeting is critical. If Powell signals supportive monetary policy, it may reverse some of the negative momentum and provide a lifeline for risk assets.

Other potential drivers of recovery include institutional re-entry and macroeconomic stabilization. As market panic subsides and traders recalibrate strategies, digital assets may begin a recovery phase, offering opportunities for investors who weather the initial storm.

Conclusion: Navigating Volatility and Looking Ahead

Today’s market collapse answers the question, “why is crypto crashing today,” with clarity: tariffs, leverage, and macro uncertainty. The Trump-China trade escalation collided with excess leverage, Powell’s silence, and ongoing security concerns to produce one of the largest single-day sell-offs in crypto history, erasing over $300 billion in value.

Yet, this turmoil is not necessarily indicative of a prolonged bear market. Upcoming regulatory decisions, potential Fed policy signals, and the stabilization of macroeconomic factors could turn the current downturn into a strategic buying opportunity. Long-term investors who maintain composure and focus on fundamentals may benefit from the volatility, as history shows that markets often rebound stronger after significant corrections.

In the meantime, traders are advised to remain cautious, manage leverage carefully, and stay informed about both macroeconomic developments and ongoing crypto-specific risks. While the immediate picture looks grim, the structural foundations of blockchain and decentralized finance remain intact, suggesting that recovery, though uncertain in timing, is plausible.

Writer @Ellena

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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