Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Cryptocurrency markets experienced a significant downturn early Friday, with Bitcoin, Ethereum, and Solana plunging alongside major stock indices. The sell-off followed President Donald Trump’s threats of “massive” new tariffs on Chinese goods, which he announced amidst an ongoing U.S. government shutdown.
Market Reaction to Tariff Threats
Bitcoin’s price dipped below $119,000 for the first time since October 2, trading around $119,028, marking a 1.7% decrease on the day. Other prominent cryptocurrencies saw steeper declines, with both Ethereum and Solana falling by nearly 5% in a single hour, reaching prices of $4,107 and $211 respectively.
The sudden market shift triggered widespread liquidations across the crypto space. Data from CoinGlass indicated approximately $459 million worth of positions were liquidated in the hour following Trump’s announcement, with long positions accounting for the vast majority. Over the preceding 24 hours, total liquidations neared $773 million.
Traditional markets also reacted negatively, with the Nasdaq down 1.77%, the S&P 500 losing 1.25%, and the Dow Jones Industrial Average dipping 0.83% by Friday morning.
President Trump’s Stance on China
President Trump articulated his tariff intentions on Truth Social, stating, “Ultimately, though potentially painful, it will be a very good thing, in the end, for the U.S.A.” He added, “One of the policies that we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States of America. There are many other countermeasures that are, likewise, under serious consideration.”
This is not the first instance of President Trump’s tariff policies impacting financial markets. In April, his “Liberation Day” tariffs on 185 countries led to Bitcoin dropping 1.1% in an hour, while the S&P 500 saw a loss of over $2 trillion in market capitalization within 15 minutes. President Trump has maintained a fluctuating approach to tariffs, both easing and hiking them against various nations and economic blocs, including China.
Government Shutdown Context
The tariff threats coincide with an ongoing U.S. government shutdown, which has resulted in the partial closure of most federal agencies, with only essential employees remaining at work. While the U.S. Bureau of Labor Statistics confirmed it would release the September 2025 Consumer Price Index on October 24, no further data releases are expected until the government fully reopens.
Amidst these uncertainties, Nigel Green, CEO of financial consultancy deVere, commented on the broader economic implications. “Every shutdown, every stalemate, every borrowing debate highlights that the U.S. is living beyond its means,” Green wrote in a note. He further noted that “investors continue to act as though record equity highs and easy liquidity…” masking underlying risks.
Market Sentiment and Outlook
Despite the current volatility and government shutdown, some market participants remain optimistic. According to Myriad Markets, 45% of predictors are bullish on Bitcoin, anticipating a rally to $140,000 before a potential drop to $110,000. (Disclosure: Myriad Markets is developed by DASTAN, the parent company of Decrypt).
The confluence of President Trump’s aggressive trade rhetoric, an ongoing government shutdown, and the resulting market volatility underscores a period of significant uncertainty for both traditional and cryptocurrency investors.
