Things had been going almost too well for investors and the bulls over the past few weeks.
Then, the day before yesterday, financial markets, especially crypto, took a serious hit...
What happened?
I won’t keep you guessing.
He’s back, as unpredictable and direct as ever.
I’m talking, of course, about US president Donald Trump.
The trade war with China
On Friday 10 October, Donald Trump published two posts on Truth Social.
In the first, he criticised China’s trade practices, calling them unreasonable.
In the second, he announced:
The United States of America will impose a 100% tariff on China, on top of any tariff it currently pays.
Doesn’t this feel familiar?
These announcements continue the trade war between the two countries, especially since the start of 2025. Do I need to remind you of "Liberation Day"?
Tensions have intensified in recent months.
In April, the United States had already raised tariffs on most Chinese imports, in some cases to 145%.
China responded with increases on metals and technology products.
Despite a few attempts at a truce, talks went nowhere.
China even tightened restrictions on exports of rare materials.
That escalation led to Trump’s latest statements. He seems surprised by China’s resolve not to back down.
Yet a meeting between Trump and President Xi Jinping was planned in the coming months...
A meeting he has now threatened to cancel.
That was all it took to trigger the market reaction we saw.
Record liquidations
You might wonder how a "simple" political announcement could cause such panic in crypto, especially when we’d grown used to this sort of thing from Donald Trump.
Bitcoin chart, source: CoinMarketCap
In theory, this kind of escalation probably shouldn’t have had such a big impact.
In practice, though, investors tend to close their riskiest positions when the world’s two biggest powers are in a trade war.
That puts crypto first in line.
This young, highly speculative market often reacts disproportionately.
A rumour, a post, a statement, and everything snowballs...
But the key point here is that many positions are leveraged.
In other words, plenty of people are trading with money they don’t have.
So when a shock hits, everything unravels fast.
That’s exactly what happened on Friday: most crypto prices fell sharply, triggering cascading liquidations.
As the chart below shows, 10 October set a historic liquidation record, with more than $16 billion in positions wiped out in a few hours.
Liquidation chart, source: CoinGlass
The lesson for traders
It’s a familiar scenario.
Traders using leverage without proper risk management are likely to be hit first.
Those holding spot positions can only wait for prices to rise again, or fall further.
And those who managed to reposition had the chance to find some excellent entries.