Crypto Market Sheds $150+ Billion as U.S.– China Tensions Escalate

Washington and Beijing are re-escalating the trade tensions, while the crypto market is feeling the brunt. The current geopolitical flare-up began when the U.S president threatened China with massive tariffs, citing Chinese export curbs on rare earth metals. Almost $19 billion of leveraged positions were liquidated in the crypto market crash that followed President Trump’s announcement of imposing over 100% tariffs.

The crypto market cap shed over $150 billion. The leading cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), faced a sharp decline. The popular altcoins followed suit.

The tit-for-tat continued as China imposed sanctions on U.S.-linked vessels, and the U.S president threatened Beijing with new trade restrictions on soybeans and wood products. The macro pressure remains a cause of concern among retail investors and institutional crypto investors.

The Financial Markets Rattle Amid the Escalating U.S.-China Geopolitical Tensions

U.S. President Trump’s announcement of 100% tariffs on China on Friday shook the global financial markets, including the crypto market. The crypto market witnessed one of the biggest crashes in history, with 19 billion leveraged positions wiped out.

The crypto market cap fell from 4 trillion to 3 trillion, and the world’s largest cryptocurrency, Bitcoin( BTC), plunged to $104,782.88, marking a 14% price drop. The Ethereum (ETH) declined 12% to hit $3,436.29. The popular altcoins are not spared either. The Dogecoin (DOGE) fell by more than 60%.

The US-China Flare up Continues

The escalation began when U.S. President Donald Trump threatened China with more than 100% tariffs on imports as a response to Chinese export curbs on rare earth metals. China had earlier introduced export controls over rare earth metals, citing national security. The country processes around 90% of the world’s rare earth metals, which are crucial for high-tech manufacturing industries, including semiconductors and defense equipment.

U.S. President toned down his stance as the tariff threat sent shockwaves across the financial markets, including crypto. China accused the U.S. of double standards by pointing out the  U.S export curbs on the semiconductor industry. China sanctioned five U.S subsidiaries of Hanwha Ocean, the South Korean shipbuilder, on October 14. The sanctions ban Chinese citizens and firms from doing any business with the US-linked vessels.

The tit-for-tat continued as both Washington and Beijing imposed port fees on each other’s ships. The current pause on over 100% tariffs is set to expire in November. If imposed, the Chinese imports will become costlier with more than 130% duties. The Chinese spokesperson had earlier on Tuesday stated that China will “fight to the end”. Flare-up amped as the U.S president threatened to impose restrictions on trade in soybeans and wood products. The geopolitical tensions are re-escalating with aggressive rhetoric from both sides, putting the financial markets, including crypto, under pressure.

Can the Crypto Market Weather the Macro Storms?

The crypto market has rebounded after the record crash, with dominant crypto tokens staging strong comebacks. The BTC rebounded to $115k level and is currently trading around $113K. The ETH regained $4000 level as well. The whole crypto market at the time of writing this article is up by 1.92% in the last 24 hours, reaching a market cap of 3.85 trillion. The current bullish trend is attributed to the anticipation of the Fed rate cuts, which push investors towards highly rewarding dynamic markets such as crypto amid lower interest rates. 

Nonetheless, continued escalation of geopolitical tensions remains a threatening macro headwind, especially for highly volatile markets such as crypto. The investors are advised to keep a close watch on the global political developments and evolving macro environment while making investment decisions.