The cryptocurrency market has suffered one of the most considerable single-day losses in history, losing about $800 billion in overall value in 24 hours. Panic spread quickly through the exchanges, and approximately $19 billion in leveraged positions were liquidated.
Bitcoin fell by 16% to a low of $110,951, and Ethereum declined by over 12% to reach a low of $3,795. The total crypto market cap had dropped to $3.69 trillion, marking the most significant decline in a long time. The altcoins suffered more, as XRP dropped 25% to $2.34, Dogecoin decreased by 28% to $0.18, and Solana and Cardano both fell by more than a quarter of their valuation.
According to market analysts, over 1.6 million traders were liquidated in what data firm CoinGlass termed the most significant liquidation in the history of crypto. These were mainly long positions, therefore indicating that traders were betting on price increments before the crash.
The market crash was triggered by escalating tensions between the United States and China. President Donald Trump declared a 100% duty on all Chinese imports, effective November 1, terming the export bans by Beijing as extraordinarily aggressive. Renewed concerns about a full-scale trade war between the world's two largest economies were fueled by the move.
The global markets responded within hours of the announcement. Bitcoin fell from $122,000 to $107,000, and Ethereum, XRP, and BNB fell by more than 15%. The overall crypto market decreased by almost $200 billion in just a few hours, dropping to $4.05 trillion.
The recent advancements in software and technology have raised worries about supply chain disruptions in key sectors like semiconductors, artificial intelligence, and blockchain infrastructure. Experts warned that this measure triggered a risk-averse response, causing investors to pull out of volatile assets such as cryptocurrencies.
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The market's leverage was also excessive, which helped cause the collapse. Most traders used borrowed money to amplify their positions, leaving them vulnerable to price swings. Once the price of Bitcoin and Ethereum fell below critical values, automatic liquidations were triggered, which compelled collateral auctioning in all major exchanges.
The situation was exacerbated by cross-margin trading of a pool of funds that held several trades. With the liquidation of positions, altcoins faced more intense selling pressure due to thinner order books. Small sell orders caused sharp price drops, triggering a domino effect that led to a market-wide decline.
Analyst Ash Crypto termed the conditions a chain reaction, as instigated by over-leveraged traders. According to him, the crash was terrible, but other severe liquidation incidents occurred in 2020 and 2022, which were followed by market recoveries. Many traders are watching to see if this correction will pave the way for another rally after volatility levels have been settled.
Collapse of the crypto market, which cost nearly $800 billion, highlights the uncertainty of a highly leveraged and sentiment-driven market. Traders suffered historic losses due to the combination of increasing geopolitical tensions and record liquidations.
Although the level of uncertainty remains high, market observers believe that prices may stabilize in the near future with lower leverage. The second step will be contingent upon China's reaction to the U.S. tariffs and the possibility of negotiations resuming before the end of November.