Historic Crypto Crash: $1 Trillion Wiped Out as Trump Tariffs Trigger Largest Liquidation Event Since Covid—Market Reset or Warning Sign?

tamir
Sat, 11 Oct 2025 07:01:55 +0000
Investor Briefing

The cryptocurrency market experienced one of its most significant selloffs in history on October 10, 2025, triggered by President Trump’s announcement of a 100% additional tariff on Chinese imports. Bitcoin plummeted from approximately $122,000 to below $110,000 (a decline of over 10%), while major altcoins experienced even steeper losses of 15-30%. The crash resulted in over $7 billion in liquidations, marking what data tracker Coinglass described as “the largest liquidation event in crypto history.”

Bottom Line: While the immediate catalyst was geopolitical, underlying technical vulnerabilities and overleveraged positions amplified the selloff. Short-term volatility is expected to persist, but medium-term fundamentals remain constructive for selective accumulation at current support levels.

What just happened: The Perfect Storm

Catalyst: The White House threatened/announced steep tariffs (100%+) and new export controls on China, re-igniting trade-war fears and knocking global risk assets. Crypto followed equities lower (Source: Reuters).

Price & liquidations: BTC dropped sharply from the week’s record highs; ETH/SOL/XRP underperformed. Multiple outlets report multi-billion USD in liquidations within hours and > $7–10B over 24h—methodologies vary, but the direction is clear: a leverage flush (Source: finance.yahoo.com).

Flows & the dollar: Into the pullback, ETF inflows had been strong earlier in the week but narrowed just before the shock; concurrently, the USD strengthened, pressuring the broader “debasement trade” (Source: Reuters).

Microstructure check

Leverage reset: High open-interest and positive/neutral funding set up a classic “air-pocket” lower when the macro headline hit; the ensuing forced long liquidations amplified the move (Source: coindesk.com).

Positioning/ETF tape: After record inflows earlier in Q4, daily ETF net flows have thinned the last two sessions—watch this closely for confirmation of dip-buying demand returning (Sourcew: Reuters+1

Sentiment: Fear gauges flipped from neutral/greed to fear after the break, consistent with near-term risk reduction (Source: feargreedmeter.com).

Near-term outlook (1–3 weeks)

Base case — Range & Retest (55%)

We expect sideways-to-lower chop as markets digest the tariff shock, equity volatility stays elevated, and ETF flows stabilize.

Implications: Probability of retests of $110k–$115k for BTC before any durable push higher. Altcoins likely lag with higher beta.

What confirms: Day-over-day ETF inflows turning positive and broadening, dollar momentum cooling, funding normalizing near flat (Source: farside.co.uk).

Bear case — Deeper Drawdown (25%)

Further escalation in trade headlines or a strong USD impulse drives another liquidation wave, targeting prior breakout/liquidity pockets (roughly $100k–$105k on BTC).

What confirms: Renewed equities selloff, larger outflows or stall in ETF demand, persistent dollar strength.

Bull case — V-shape Recovery (20%)

Headline de-escalation + renewed record ETF inflows flip the tape back to trend; BTC reclaims $120k+ with breadth improvement in majors.

What confirms: Strong, broad ETF net inflows (multiple issuers), falling DXY, improving equity risk sentiment.

“Buy the dip” or wait?

Short answer: Scale-in only on confirmation; otherwise patience is warranted. Here’s a disciplined approach:

1. For BTC/ETH core exposure:

Add partial if BTC reclaims and holds key reclaim levels on volume (e.g., back above the breakdown area) and U.S. spot-ETF net flows turn positive for at least 2 consecutive days. Invalidation = a close back inside the prior range with accelerating dollar strength (Source: farside.co.uk).

2. For altcoins (higher beta):

Historically underperform into liquidation cascades and during macro risk-off. Prefer delay or pair with BTC hedges until ETF flow + USD backdrop improve (Source: coindesk.com).

3. If you’re cautious:

Wait for a cleaner retest (e.g., round-number supports) or a higher-low after the first bounce. Use smaller sizing and wider stops than usual—volatility is elevated. (This aligns with how leverage flushes often resolve.)

Data the market is watching (daily)

U.S. spot-Bitcoin ETF flows (Farside Investors tracker). Ongoing net inflows argue for buy-the-dip durability; shrinking/negative flows suggest chop or further downside.

Dollar (DXY) & equities. A stronger USD and equity drawdowns tend to weigh on crypto risk appetite.

Derivatives stress: Funding rates and liquidations—signs of leverage rebuilding too quickly would increase downside tail risk.

Bottom line

Is now the right time to buy?

Active traders: Tactical nibble with confirmations (reclaims + ETF inflows), keep risk tight.

Long-term allocators: Staggered entries over days/weeks can be reasonable, but be prepared for further 8–15% swings given macro uncertainty.

Altcoins: Higher risk; wait for BTC stability + improving flows before adding beta.

This is market analysis, not investment advice. Manage sizing, use stops, and anchor decisions to the data above.