Finance

Bitcoin, Ethereum Rebound: Did Trump’s Tariff Blow Trigger a Crypto Flash Crash?

Crypto market crashed after Trump’s tariff move, leading to $20B in liquidations, but is now recovering.

October 12, 2025, 11:29 PM

A glowing Bitcoin symbol is embedded in cracked, fiery lava.

The fiery Bitcoin symbol erupts from the molten lava, symbolizing the volatile nature of the cryptocurrency market. By MDL.

Executive Summary

A substantial cryptocurrency market downturn on Friday, triggered by President Trump’s announcement of new tariffs on Chinese imports, led to nearly $20 billion in liquidations, marking the “largest single-day wipeout in crypto history.”

During the downturn, Bitcoin fell sharply from $121,000 to $109,000, and Ethereum dipped to $3,686, with $16.7 billion liquidated from long positions across the market.

Following the crash, the cryptocurrency market entered a “relief rally,” with Bitcoin rebounding by 5% to $115,100 and Ethereum surging 10.5% to $4,138, indicating the event was a “geopolitical knee-jerk, not a structural break.”

The Story So Far

The recent significant downturn and subsequent recovery in the cryptocurrency market, marked by nearly $20 billion in liquidations, was primarily triggered by escalating geopolitical tensions between the US and China, specifically President Donald Trump’s announcement of new, massive tariffs on Chinese imports and the cancellation of a meeting with Chinese President Xi Jinping, following Beijing’s move to restrict rare earth exports, which collectively caused a parallel slump across global stock markets.

Why This Matters

President Donald Trump’s announcement of new tariffs on Chinese imports triggered the “largest single-day wipeout in crypto history,” liquidating nearly $20 billion and underscoring the cryptocurrency market’s significant vulnerability to geopolitical tensions and traditional economic policy shifts. This event also caused a parallel slump in global stock markets, demonstrating the broad economic ripple effects of escalating trade disputes, even as the crypto market quickly entered a “relief rally” suggesting the downturn was a “geopolitical knee-jerk” rather than a fundamental structural break.

Who Thinks What?

President Donald Trump believes that increasing tariffs on Chinese imports is a necessary measure, even if “potentially painful” for Americans, in response to escalating tensions and China’s restriction of rare earth exports.

Sean Dawson, head of research at Dervie, observed that the market experienced a “flash crash of liquidations,” wiping out nearly $20 billion in digital assets, with the majority stemming from long positions.

Dean Serroni, CEO of Merkle Tree Capital, views the cryptocurrency market’s sharp decline as a “geopolitical knee-jerk, not a structural break,” and considers the subsequent recovery a “textbook relief rally” driven by short-covering and mean reversion after an overreaction to Trump’s tariff announcement.

Bitcoin and Ethereum have begun to recover losses following a substantial market downturn on Friday, which saw nearly $20 billion in cryptocurrency liquidations—dubbed “the largest single-day wipeout in crypto history.” The sell-off was triggered by President Donald Trump’s announcement of new tariffs on Chinese imports, causing a parallel slump in global stock markets.

Market Plunge and Record Liquidations

On Friday, Bitcoin experienced a sharp decline, falling from $121,000 to as low as $109,000 within a seven-hour period, effectively erasing early “Uptober” gains. Ethereum similarly dipped to $3,686, while Solana touched just above $173, according to CoinGecko data.

The volatile trading session led to a “flash crash of liquidations,” wiping out almost $7 billion across all markets in a single hour, with $5.5 billion stemming from long positions, explained Sean Dawson, head of research at on-chain options platform Dervie. By the end of Friday, CoinGlass data indicated that nearly $20 billion in digital assets had been liquidated, with $16.7 billion from long positions.

Geopolitical Tensions as Catalyst

The market’s abrupt decline coincided with President Trump’s declaration that he was canceling a scheduled meeting with Chinese President Xi Jinping and had ordered a “massive increase” in tariffs on Chinese imports. This move, which President Trump acknowledged could be “potentially painful” for Americans, escalated tensions between the two largest global economies after Beijing had moved to restrict exports of rare earths and critical minerals.

Traditional stock markets also suffered, with the Nasdaq falling 3.6%, the S&P 500 down 2.7%, and the Dow slipping 1.9% in response to the geopolitical developments.

Relief Rally and Market Outlook

The cryptocurrency market has since entered what Dean Serroni, CEO of crypto investment manager Merkle Tree Capital, described as a “textbook relief rally.” Serroni attributed Ethereum’s 11% surge to “pure short-covering and mean reversion after the market overreacted to Trump’s tariff bombshell.” He also noted “thin” selling pressure and a reset in open interest across derivatives markets following the spike in volatility caused by “overleveraged derivatives traders.”

As of recent reports, Bitcoin has rebounded by 5% to trade around $115,100, and Ethereum is up 10.5% at $4,138, according to CoinGecko. Other major altcoins, including Solana, BNB, and Dogecoin, have also seen significant gains, rising 12%, 16.5%, and 11.4% respectively.

Serroni concluded that the recent market rout was a “geopolitical knee-jerk, not a structural break,” a sentiment seemingly supported by China’s apparent softening of its stance over the weekend.