While many were quietly heading into the weekend, the crypto market suffered the largest crash in history! Bitcoin plunged late in the evening below $105,000, while Ethereum dropped to around $2,500.

Bitcoin chart
At the time of publication, Bitcoin had slightly recovered and was trading around $113,770. Source: CoinMarketCap

Several altcoins lost more than 50% in this historic sell-off. Ethena (ENA) and Pump.fun (PUMP) on Binance fell by 70% and 91% respectively — all within minutes. Story Protocol’s IP token crashed from $9 to $1 for a few seconds. In total, more than 1.5 million crypto traders were liquidated. But what triggered this shock?

Liquidation heatmap
Liquidation heatmap. Source: Coinglass

Trade war flare-up

The trigger for the crash was U.S. President Donald Trump’s threat to “massively raise tariffs” on Chinese imports in response to a policy shift in Beijing. On Thursday, China’s Ministry of Commerce announced that exports of products containing more than 0.1% rare earth elements would now require a license. The news hit already nervous financial markets following an overheated AI-driven stock rally: the S&P 500 dropped 2.7%, and the Nasdaq lost over 3.5%.

Trump then announced new tariffs of up to 100% on Chinese imports, new export restrictions on critical software, and the cancellation of his meeting with China’s President Xi Jinping. After the U.S. markets closed, turbulence spilled into the 24/7 crypto market. Following Bitcoin’s recent all-time high, euphoria and extreme bullish positioning dominated sentiment. Later, Trump stated he was still open to meeting Xi and might reverse the tariff hike if China changes course before November 1.

Mass liquidation on futures exchanges

Adding intrigue, one trader reportedly opened a massive short position on Bitcoin and Ethereum just a day before the crash — profiting over $160 million. The timing suggests possible insider knowledge from Trump’s inner circle.

While the stock market was overheated and looking for a reason to correct, leverage in the altcoin sector had also reached extreme levels — partly due to the success of the Hyperliquid exchange. Traders using leverage to farm airdrops on new perpetual platforms added fuel to the fire. Once long positions were wiped out of order books, automatic deleveraging began affecting short positions as well.

Crypto analyst Conor Grogan reported on Hyperliquid: “I counted 1,010 traders who lost over $100,000 today and 206 who lost more than $1 million. 358 of those accounts were wiped to zero, including one user who lost all $19 million.” Popular trader Machi Big Brother was also caught in the carnage.

The largest crypto liquidation in history

Following the initial shock, forced liquidations accelerated the sell-off. Estimates vary, but one thing is clear: this was the largest liquidation event in crypto history. For comparison: during the COVID crash, total liquidations reached ~$1.2 billion at a ~$300 billion market cap (~0.4%). During the top crypto exchange FTX collapse, they were ~$1.6 billion at ~$1 trillion (~0.16%). Now, liquidations are around $19.3 billion; at a market cap of ~$4.2 trillion, that’s roughly 0.46% — higher than COVID and nearly three times the FTX shock.

Bitcoin analysts remain optimistic

Several Bitcoin analysts believe the latest price drop could be a buying opportunity.

Bitwise Invest senior investment strategist Juan Leon wrote on X that “the best time to buy BTC has tended to be when it is being dragged down by broader markets.”

Meanwhile, Bitwise Invest CIO Matt Hougan reminded his 85,900 X followers of a common investor pattern — that while many claim they’ll buy Bitcoin during a pullback, they often hesitate when it happens because “the market doesn’t feel good at that point.”

“It never feels good when you buy the dip. The dip comes when sentiment drops. Writing the number down can be a good form of discipline,” Hougan added.