Key Insights
- The cryptocurrency market crashed, with BTC slipping below $120,000. The market crash also targeted overleveraged positions.
- President Trump published a lengthy paragraph about China, stating that a “massive increase” in tariffs is forthcoming.
- The offshore Chinese Yuan saw a reduction in gains as Trump suggested tariff hikes.
Markets plunged sharply as the S&P 500 shed over $700 Billion in value within minutes. The sudden crash sent shockwaves through Wall Street, triggering widespread panic among investors.
This was also reflected in the crypto markets, which faced similar action. The crash caused the total crypto market to drop below $4 trillion.
Political trade wars and macroeconomic news released on October 10th sparked the crypto market crash. Trump’s tariffs on China led to a massive capital loss in the markets.
What caused the crypto market crash? Was it Trump’s tariff?
According to The Kobeissi Letter, President Trump released a statement indicating that a significant increase in tariffs was forthcoming. In a matter of three minutes, the S&P 500 lost about $700 billion in market capitalization.
This was a sign that the trade wars were back. Trump also noted that the meeting with President Xi of China was unlikely.
As the financial markets were thrown into anarchy, investors drove U.S. Treasuries to day highs as a safe haven. Trump’s remarks on China also led to a 1.5 percent decline in the Nasdaq 100. This led to pronounced losses in crypto assets that were AI and tech-focused due to their high beta.
At the same time, the offshore yuan was weakened, as Trump’s tariff proposals had affected the world’s currencies. There was panic, and traders were selling stocks in a state of uncertainty.
A combination of geopolitical factors, currency instability, and the flight to safety led to the sharp decline in the market. This left Wall Street and analysts in shock, uncertain of the fallout of these linked economic shocks.
How Did BTC, ETH, XRP, and Others React?
From a technical perspective, the overall cryptocurrency market declined by 2.9%. It reached $3.99 trillion, indicating significant selling pressure across key players. Holders faced a market torn between macro headwinds and structural demand.
For Bitcoin (BTC), the price dropped 2.49 percent to $117,801, and Ethereum (ETH) declined 5.5 percent to $4,097. This was an indication of further liquidation in futures and spot markets.
Altcoins took a heavier hit in the market downturn, with Solana falling 4.19% to $209.90. XRP and Dogecoin also slid, dropping 2.67% and 4.30% respectively.
This also highlighted a general weakness. DoubleZero (2Z) and World Liberty Financial (WLFI) experienced the largest crash, with declines of 16% and 14%, respectively.
Nevertheless, BNB was relatively resilient, with a 0.87% decline over 24 hours, but it was up 7.25% on a weekly basis. Market sentiment indicators shifted to neutral, with a Fear and Greed Index of 54 and an RSI of 37.65. This indicates that the market was oversold.
Analysts attribute the sudden market drop to profit-taking and a decline in liquidity. Uncertainty around ETF developments added to investor caution.
Overleveraged Positions To Be Cleared!
Another reason could be the urge to clear overleveraged positions from the market. Since the last quarter of the year was bullish, this could be a common tendency to clear out liquidity.
Perpetual futures for Bitcoin were at highs, and it was common for this leverage to be reduced. This meant that longs were trapped but were resisting liquidations.
In conclusion, the market was majorly affected by the trade war and shift of capital to treasuries as a haven. Bitcoin, Ethereum, Solana, and XRP all dropped to key levels, while Binance Coin (BNB) stayed above $1200.
