Bitcoin News Today: Trump's Tariff Threats Ignite $16B Crypto Liquidation Wave

The cryptocurrency market faced a severe liquidation event in early October 2025, with over $16 billion in leveraged long positions wiped out following U.S. President Donald Trump's threat of 100% tariffs on Chinese imports. The move reignited trade war fears, triggering a sharp sell-off in major digital assets like Bitcoin (BTC), Ethereum (ETH), XRP, and Solana (SOL), with BTC briefly falling below $110,000 and ETH dropping 15%-30% in hours Coindesk^[1]. Total crypto market capitalization plummeted to $3.87 trillion, with Ethena's stablecoin USDe briefly dipping below $1, signaling derivatives market stress Coindesk^[1].

The liquidation wave was exacerbated by the U.S. government shutdown, which delayed critical economic data releases, heightening macroeconomic uncertainty. On-chain data revealed $900 million in daily liquidations, with over 250,000 traders affected, as exchanges forced closures of leveraged positions amid heightened volatility MEXC^[2]. Bitcoin's 10% drop over 24 hours and Ethereum's weekly loss of 10.6% underscored the severity of the correction MEXC^[2]. Analysts noted that the sell-off could increase the likelihood of two additional 25-basis-point rate cuts by the Federal Reserve, framing the downturn as a "monster discount" MEXC^[2].

Market participants remain divided on the trajectory of recovery. While some argue the correction reflects a gradual bottoming process, others highlight structural challenges, including fragmented liquidity and institutional hesitancy. Market makers, crucial for stabilizing prices, faced increased pressure to absorb imbalances during the sell-off, employing dynamic spread adjustments and arbitrage strategies to align prices across exchanges Tokenomics^[4]. However, the prolonged volatility has strained liquidity, with bid-ask spreads widening in less liquid assets .

The geopolitical context remains pivotal. Trump's tariff escalation, framed as a response to China's rare-earth export controls, has disrupted global supply chains, particularly in semiconductors and AI infrastructure. This has deepened uncertainty for sectors underpinning digital assets. Meanwhile, the absence of regulatory clarity in China and the U.S. government shutdown have compounded market fragility, delaying key approvals for crypto-related products like XRP and Solana ETFs CoinPedia^[3].

Current market sentiment reflects caution, with Bitcoin trading at $121,679 (down ~1.6%), Ethereum at $4,465 (down ~4.2%), and XRP at $2.86 (down ~3.7%) as of early October CoinPedia^[3]. Traders are bracing for further volatility ahead of November's tariff implementation, with outcomes dependent on whether diplomatic negotiations resume or tensions escalate further.