A sudden resurgence of U.S.-China trade war anxieties, sparked by a statement from former U.S. President Donald Trump, sent a swift tremor through global financial markets, with the cryptocurrency sector bearing a significant brunt of the initial fallout. The unexpected declaration reignited fears of a heated geopolitical conflict, leading to widespread risk aversion and substantial liquidations across digital asset markets.
Renewed Trade War Fears Shake Global Markets
On Friday, October 10, Donald Trump accused China via Truth Social of issuing "hostile letters" threatening new export controls on critical rare earth materials, a move he warned could "clog markets" worldwide. He further vowed a robust U.S. response, including "massive tariff increases" and "financial countermeasures." This post immediately revived memories of previous tariff escalations, notably the "Liberation Day" tariff war earlier this year, which saw Beijing retaliate with significant tariffs and tighter rare earth export controls. The message served as a stark reminder of escalating trade tensions, triggering a defensive shift across global risk assets.
Crypto Markets Brace for Impact
The immediate consequence for the cryptocurrency market was severe, with over $700 million in crypto positions liquidated within hours, primarily affecting long positions which accounted for $609 million of the losses. Bitcoin momentarily dipped below $119,000, registering a nearly 3% decline, while Ethereum saw a sharper 5.8% drop to approximately $4,100. Funding rates tightened significantly across major exchanges, indicating a rapid deleveraging by traders amidst mounting uncertainty. The crypto market's sensitivity to these geopolitical tremors stems from its nature as a risk asset; fears of supply chain disruptions, inflation, and general global instability often lead investors to shed speculative holdings.
Outlook and Volatility Ahead
With Beijing yet to issue an official response, traders are bracing for continued volatility heading into the weekend. Any counterstatements from China or formalization of new U.S. tariff measures could exert further downward pressure on crypto markets. Key technical levels to watch include Bitcoin's support near $115,000 and resistance at $123,000, while Ethereum's crucial support lies around $4,000, with overhead resistance near $4,400. The rapid cascade of liquidations underscores how quickly leveraged positions can be wiped out by sudden, unexpected shifts in the global political landscape.
