Trump's tariff threats triggered a bloodbath in the crypto world! Bitcoin fell 7% with $9 billion liquidated in a single day.

Trump's tariff threat escalates, accusing China of monopolizing rare earths and announcing a significant increase in tariffs, triggering a global risk asset dumping wave. Bitcoin falls 7% below $105,000, with a total liquidation amount reaching $9 billion in the past 24 hours, and long positions worth $600 million evaporating. How will the rare earth war severely impact the crypto assets market? This article deeply analyzes the chain reaction between Trump's tariff threats and Bitcoin's big dump.

Trump's tariff threat escalates: Rare earth war ignites global market panic

On October 10, U.S. President Trump issued a lengthy statement via Truth Social, using remarkably intense language. He pointed out that China is attempting to monopolize rare earth elements and described China's newly implemented rare earth export controls as "insidious and hostile" actions, claiming that Beijing is trying to "captivate" other countries through its resource advantages. In response, Trump announced plans to "significantly increase tariffs on Chinese products entering the United States" and emphasized that the U.S. will "retaliate economically" based on China's response.

The sudden threat of tariffs from Trump did not come out of nowhere, but was a direct response to the escalation of China's export controls on rare earths. From October 9 to 10, the Chinese Ministry of Commerce announced strengthened export controls on rare earths, expanding the scope of permit requirements to cover more elements and related technologies. More threateningly, Beijing is not only controlling the export of rare earths from within China but has also extended regulatory powers overseas, imposing restrictions on foreign products that contain Chinese rare earth elements or use Chinese technology for processing. Chinese officials hinted at rejecting export applications for rare earths intended for defense purposes while emphasizing the need to strengthen scrutiny for semiconductor and artificial intelligence applications.

The background of this rare earth war is extremely critical. China controls about 70% of the global rare earth production and up to 90% of the processing capacity. These elements are core materials for electric vehicle batteries, semiconductor chips, defense systems, and renewable energy technologies, and are almost irreplaceable. Trump acknowledged in a statement that the United States "also has a monopoly position, much stronger and more far-reaching than China," but only began to consider leveraging these advantages after China's export control measures were implemented. He also questioned the timing of China's export restrictions in relation to the Middle East peace statement, implying that this could be part of a larger geopolitical game.

The impact of Trump's tariff threats extends beyond trade. The president directly canceled a planned meeting with Chinese President Xi Jinping during the APEC summit in South Korea, sending a clear signal to the market: the economic confrontation between the US and China is entering a new intense phase. European officials have also expressed "serious concerns" about China's rare earth controls, while Washington is urgently formulating possible countermeasures. The uncertainty facing global supply chains has suddenly increased, and the market reacted sharply.

Bitcoin big dump 7%: 9 billion USD liquidation wave sweeps Crypto Assets market

(Source: Trading View)

After the news of Trump's tariff threats broke, the Crypto Assets market immediately fell into a panic selling. Bitcoin's big dump became the focus of this bloodbath, with the BTC price sliding from its peak within just a few hours, falling by 7%, and at one point dropping below the critical psychological support level of 105,000 USD. As of the time of this report, the trading price of Bitcoin had fallen to a low of 2.8%, breaking below the technical support line of 118,000 USD, indicating extremely weak market sentiment.

The disaster faced by high-leverage traders is even more severe. According to Coinglass data, nearly $600 million in long positions were liquidated within four hours after Trump posted his tweet. The total amount liquidated in the past 24 hours reached an astonishing $9 billion, a figure that belongs to extreme events in the history of the crypto assets market. The mechanism of the liquidation wave occurs when the margin of leveraged traders is insufficient to maintain their positions, leading exchanges to forcibly liquidate positions, and this chain reaction further exacerbates the price fall, creating a vicious cycle.

The speed and magnitude of this Bitcoin big dump caught many investors off guard. Before the news of Trump's tariff threats emerged, Bitcoin had just experienced a wave of rebound, and many traders had established optimistic long positions. However, the sudden arrival of a geopolitical black swan event rendered technical analysis and fundamental research ineffective in an instant. Those traders using high leverage were the first to bear the brunt; even with 5x leverage, a 7% fall means a 35% loss, and many were forcibly liquidated in their sleep, losing everything.

The chain reaction of Bitcoin's big dump quickly spread to the entire Crypto Assets market. Major coins such as Ethereum, Solana, and XRP were not spared, with many altcoins experiencing declines of over 10%. The total market capitalization evaporated by hundreds of billions of dollars within 24 hours, and the fear and greed index rapidly fell from the "greed" zone into the "fear" zone. Requests for withdrawals from exchanges surged, indicating that investors are moving their assets to cold wallets or exiting to observe, further exacerbating the liquidity tension in the market.

It is worth noting that this big dump of Bitcoin is not an isolated event in the crypto assets market, but part of a global risk asset selling wave. This highlights the increasing correlation between Bitcoin and traditional financial markets, especially the linkage with tech stocks. Once regarded as a "safe-haven asset" or "digital gold," Bitcoin has acted more like a high-risk tech stock in the face of geopolitical crises, a phenomenon that investors should reflect on.

Domino Effect of the Rare Earth War: From Supply Chain to Financial Market

To understand why Trump's tariff threats can trigger such a drastic market reaction, it is necessary to recognize the strategic position of rare earth elements in the modern economy. Although these 17 chemical elements are named "rare earths," their actual abundance in the crust is not considered scarce; the real challenge lies in extraction and processing. China has established a complete industrial chain from mining to refining through decades of investment and technological accumulation, mastering 90% of the global processing capacity, which is an advantage that other countries cannot replicate in the short term.

The application range of rare earth elements is broad and critical. In the electric vehicle sector, permanent magnet synchronous motors require rare earth elements such as neodymium and dysprosium to achieve high performance; in the semiconductor industry, rare earth oxides are essential materials for wafer polishing; in the defense industry, precision-guided weapons, radar systems, and jet engines rely on rare earth elements; in the renewable energy sector, the magnets in wind turbines also need rare earths. It can be said that almost every corner of modern technological civilization has the presence of rare earths, and losing a stable supply of rare earths would have a catastrophic impact on the global industrial chain.

China's choice to strengthen rare earth export controls at this time is quite significant. Trump questioned the timing in his statement, suggesting that it coincides with the Middle East peace declaration, implying that Beijing may be coordinating a larger geopolitical strategy. Regardless of the motivation, this move immediately triggered a chain reaction in the global market. Rare earth mining stocks outside of China soared due to expectations of tighter supply, with Australian and American rare earth companies becoming targets of capital inflow. However, technology and industrial stocks faced an entirely opposite fate, as potential raw material bottlenecks led investors to sell off these stocks.

Trump's announcement of tariff threats has further amplified market panic. If the United States really raises tariffs on Chinese products significantly, it will not only increase domestic inflationary pressures but also hit global trade flows, potentially triggering a new round of global economic slowdown. Historical experience shows that trade wars often have no real winners, and both sides will bear economic losses, while other global economies will also be affected. The market's concern about this "win-win" scenario directly translates into the dumping of risk assets.

Supply chain experts warn that even if the United States is determined to eliminate its dependence on Chinese rare earths, establishing alternative supply chains will take at least 5 to 10 years. During this period, any disruption in supply could lead to a halt in critical industries. For a modern economy that relies on semiconductors and electronic products, this uncertainty is enough to trigger risk-averse behavior among investors. The big dump of Bitcoin is a direct manifestation of this risk-averse sentiment, as investors prioritize reducing exposure to high-risk assets when they anticipate a bleak economic outlook.

Risk assets crash across the board: Bitcoin dances dangerously with tech stocks

The tariff threats from Trump have not only triggered panic in the crypto assets market but have also severely impacted traditional financial markets. The S&P 500 index fell by 2%, and the Nasdaq index plummeted by 2.7%, with technology stocks becoming the hardest hit. Tech giants like Apple, Nvidia, and Tesla, which rely on complex supply chains, saw their stock prices drop sharply as investors worried that disruptions in rare earth supplies would affect these companies' production capabilities. This widespread wave of dumping clearly shows that the big dump of Bitcoin is not an isolated incident, but part of a broader repricing of risk assets.

The correlation between Bitcoin and technology stocks is particularly evident in this event. In recent years, as institutional investors have entered the Crypto Assets market in large numbers, the price trend of Bitcoin has increasingly synchronized with the Nasdaq index. The underlying logic of this correlation is that the investor group holding Crypto Assets highly overlaps with the group holding technology stocks. When market sentiment shifts towards risk aversion, they will simultaneously reduce their allocation in both asset classes. In addition, many technology companies themselves hold Bitcoin as part of their balance sheets, and a decline in technology stocks will weaken these companies' purchasing power, thereby affecting the demand for Bitcoin.

The broader risk aversion sentiment is another important factor driving the big dump of Bitcoin. When geopolitical risks rise, investors typically react with "cash is king," selling various risk assets in favor of traditional safe-haven tools like the US dollar and US Treasury bonds. Interestingly, gold performed relatively well during this event, even seeing a slight increase, highlighting the vulnerability of Bitcoin's narrative as "digital gold" in times of crisis. Although Bitcoin supporters have long claimed that BTC is a hedge against fiat currency devaluation and financial system risks, actual market behavior shows that, in times of true crisis, investors still trust traditional safe-haven assets more.

This incident has also exposed the dangers of high-leverage trading in the Crypto Assets market. The $9 billion liquidation scale shows that a large number of investors used 5x, 10x, or even higher leverage. While high leverage can amplify profits during stable market upswings, it can equally magnify losses during black swan events. More dangerously, the liquidation itself exacerbates price volatility, forming a "liquidation spiral": price drops trigger liquidations, the selling pressure from liquidations further depresses prices, leading to more liquidations being triggered. This mechanism makes the volatility of the Crypto Assets market far exceed that of traditional markets.

Investment Strategies After Trump's Tariff Threats: Opportunities and Pitfalls in a Crisis

In the face of market turmoil triggered by Trump's tariff threats, investors need to calmly assess the current situation and adjust their strategies. First, it is important to recognize that this big dump of Bitcoin is largely an overreaction to sudden geopolitical events. Historical data shows that the crypto assets market often experiences a "V-shaped reversal" following major negative news, which means a rapid fall followed by a quick rebound. The key question is: is this a short-term panic dumping, or the beginning of a deeper trend reversal?

From a fundamental perspective, Trump's tariff threats and China's rare earth controls will indeed cause substantial damage to the global economy, but the extent and duration of their impact remain highly uncertain. Historically, Trump has threatened to impose tariffs on China multiple times during his first term, but many of those threats ultimately did not fully materialize or were partially rolled back after implementation. The market often reacts to the worst-case scenario by initially "selling off" and then rebounds upon realizing that the actual situation is not as bad. Therefore, long-term investors may see this Bitcoin big dump as an opportunity to buy at a low.

However, in the short term, the market may still maintain high volatility. The cancellation of the meeting between Trump and Xi Jinping means that the dialogue channel between the U.S. and China is temporarily interrupted, and more confrontational measures may be introduced in the coming weeks. Investors should be psychologically prepared for continued market fluctuations and avoid making irrational decisions in panic. For investors who already hold Bitcoin, if the investment logic has not fundamentally changed, blindly cutting losses may lock in losses; for investors looking to enter the market, gradually building positions rather than taking large positions at once may be a more prudent strategy.

In terms of technical analysis, after Bitcoin broke through the two support levels of 118,000 USD and 105,000 USD, the next key support may be at the psychological level of 100,000 USD. If this psychological level is also breached, it may trigger a larger-scale dumping, with the target possibly falling to around 90,000 USD. Conversely, if Bitcoin can stabilize at the current level and regain 118,000 USD, it may indicate that the most panic stage has passed. Investors should closely monitor the gains and losses of these key price levels as an important indicator of market sentiment.

Risk management is particularly important in the current environment. The recent $9 billion liquidation tragedy once again proves that excessive use of leverage is a major taboo in Crypto Assets investment. Even seemingly "safe" long positions can collapse instantly in the face of a black swan event. It is advised that investors strictly control the leverage ratio, or completely avoid using leverage, opting for spot investments to reduce risks. Furthermore, diversification of asset allocation is also key; do not bet all funds on Crypto Assets, keeping a certain proportion of cash and traditional safe-haven assets can provide a buffer during market big dumps.

BTC-7.41%
ETH-12.89%
SOL-16.71%
XRP-14.72%
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