Markets braced for chaos after Trump triggers record-breaking crypto crash
America already imposes 30 percent tariffs on Chinese imports, which means Donald Trump’s latest threat will increase tariffs to 130 percent – Shawn Thew/Pool/EPA/Shutterstock
New imposition threat from Donald Trump 100 tariffs to China It has triggered one of the biggest cryptocurrency crashes in history and raised fears of chaos in global markets next week.
Nearly $400bn (£300bn) wiped off its value crypto market That’s less than 24 hours after Mr. Trump promised late Friday that he would impose steep new tariffs on Chinese imports within weeks.
It appears that the Bank of England is closely monitoring developments in line with normal practice ahead of what is expected to be a turbulent opening in Asian markets on Sunday night. The bank declined to comment but traders in the city are alert to panic selling, with futures markets already signaling steep declines of around 6 percent.
Traders who used borrowed money to bet on Bitcoin and other digital currencies suffered a record loss of $19 billion on Friday night. The size of the losses is more than double the next largest single-day loss in 2021, when the market took an $8.5 billion hit.
Unlike traditional financial markets cryptocurrency trading continued throughout the week, and Mr. Trump’s threat triggered heavy selling that lasted into the weekend. The price of Bitcoin, by far the largest cryptocurrency, fell more than 10 percent on Friday. It remained relatively stable on Saturday, falling 5.9% to £83,838.
The speculators most affected had used borrowed money to bet on price movements, in a process known as leveraged trading. Sharp declines in the prices of digital currencies resulted in crushing losses on these transactions as positions were wiped out.
In a sign of the possible human toll of the accident, a prominent Ukrainian crypto blogger died by suspected suicide on Saturday.
A 32-year-old crypto entrepreneur was found dead from a gunshot wound in his car, Kiev Police said. In a post on his official Telegram channel, police said he told relatives he was depressed “due to current financial difficulties.”
Locally, he was called Kostyantyn Ganich, referred to online as Kostya Kudo. A post on his Telegram channel, which provides cryptocurrency advice to tens of thousands of people, said he “tragically passed away.”
Marcus Sotiriou, partner and crypto analyst at Impact Fundry, said: “A lot of people will be hurt by this crash. A lot of people will be overleveraged. I’ve seen a lot of traders with multimillion-dollar portfolios wipe out because of it.”
Some exchanges struggled to handle the chaos. Binance was forced to apologize for “intermittent delays or display issues” due to “heavy market activity.”
Experts have raised their suspicions of insider trading after some anonymous accounts made almost $200 million by betting on price drops less than an hour before the tariff announcement.
This fueled unproven speculation that someone had prior knowledge of the US president’s announcement and used it to profit from the crash.
Joshua de Vos of industry data provider and publication CoinDesk said: “While there is no conclusive evidence of insider trading, wallet activity shows a strong and directional sentiment.
“The timing and scale of positions opened on October 10, just before the market-wide liquidation, raises the suspicion of information asymmetry.”
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The White House did not respond to requests for comment.
Mr. Trump has reignited the trade war with China against the backdrop of global markets already unsettled by a dotcom-style bubble in technology stocks inflated by AI enthusiasm. Following two chaotic bankruptcies in the US, there are also fears that the $3 trillion private credit market, also known as “shadow banking”, could be in trouble due to poor oversight.
The United States took action last week after Beijing announced strict export controls on all products containing rare earth minerals from mines anywhere in the world. The rules affect everything from cars to missiles and solar panels, marking an extraordinary power grab by Beijing.
Mr. Trump said this was evidence that China had become “very hostile” and was trying to “make life difficult for almost every country in the world.”
The US already imposes 30 percent tariffs on Chinese imports, meaning the latest threat would increase tariffs to 130 percent. Mr. Trump has promised to impose the new tariffs by Nov. 1 and possibly sooner.
Edmond de Rothschild’s chief investment officer, Nicolas Bickel, said the tariff threat was “clearly unexpected” by the market.
“If these 100 percent tariffs continue, they will be approximately 60 percent higher than the previous average tariffs on Chinese goods,” he said.
IG analyst Chris Beauchamp said the stock market was “poised for a potentially volatile Monday open.”
Fears of stock market chaos were further fueled by pre-existing concerns about a possible bubble in AI.
The Bank of England warned last week that overvalued tech stocks could pose a “material” danger to the UK economy. Jamie Dimon, chief executive of JP Morgan, told the BBC this week that he was “much more worried than others” about the possibility of a “sharp correction” in stock markets and that valuations “look stretched”.
Any stock market crash also risks exposing the $3 trillion market to private debt. This lightly regulated “shadow banking” market has come under intense scrutiny in recent weeks following the collapse of two US companies that were heavily dependent on such financing.
First Brands, an Ohio-based auto parts supplier, collapsed last month with $11.6 billion in debt. Tricolour, the third-largest used car retailer in Texas and California, filed for bankruptcy protection in September amid more than $1 billion in debt.
Both were heavily backed by the private lending industry, in which lightly regulated money managers lend to companies rather than banks. This corner of the market has expanded tremendously in recent years, becoming a $3 trillion industry.
The twin collapses have raised questions about how accurately private equity firms making these loans account for them and their level of due diligence in the industry. Deutsche Bank expressed concerns that First Brands could be the “canary in the mine.”
Shares of investment giants Apollo, Blackstone, KKR and Ares, which pioneer private lending, fell an average of 4.5 percent on Friday, falling nearly 18 percent last month.
