Crypto Recovers After Trump Tariff Shock, Key Data Ahead

The cryptocurrency market experienced extreme volatility over the weekend, with total market capitalization plunging to $3.3 trillion on Saturday morning – the lowest level since early July. The selloff was triggered by President Donald Trump’s announcement that he would impose an additional 100% tariff on goods from China, in addition to the 30% tariffs already in effect, starting November 1 or sooner. This political move created ripples across both traditional and digital asset markets, with stocks and crypto assets tanking on Friday and throughout the weekend.

However, markets entered recovery mode during Monday morning’s Asian trading session, with crypto market capitalization reclaiming the $4 trillion level. Bitcoin was moving back toward $116,000 while Ethereum was closing in on $4,200, with both major cryptocurrencies returning to their range-bound channels. The recovery was mirrored in traditional markets, with US stock market futures opening sharply higher as investors reacted to US-China de-escalation over the weekend, according to the Kobeissi Letter.

The crypto market selloff was particularly brutal due to the amount of leverage in derivatives markets that was flushed. A buildup of short positions before Trump’s tariff announcement caused massive long position liquidations in what became the largest leverage flush in crypto history. While this event was severe, such flashouts have become increasingly common in crypto markets due to the popularity of leverage perpetual swaps.

This week presents several key economic events that could influence market direction. Federal Reserve Chair Jerome Powell is scheduled to speak on Tuesday, though with the current dearth of economic data due to the ongoing US government shutdown, there are unlikely to be any clear signals for future monetary policy changes. The shutdown continues to hamper policymakers’ efforts to analyze economic data, which could ultimately influence Federal Reserve decisions.

Wednesday and Thursday will see the release of the New York Fed Manufacturing Index and the Philly Fed Manufacturing Index reports. These monthly economic indicators, derived from surveys of manufacturers in their respective states, assess general business conditions. MarketWatch reported over the weekend that New York and California are struggling economically, noting that if conditions worsen, ‘they could take the whole US economy down with them.’ The OPEC Monthly Report on Monday and the NAHB Housing Market Index on Thursday round out the week’s significant economic data releases.

The third quarter earnings season officially opens this week, with approximately 10% of S&P 500 companies reporting earnings. Major financial institutions including JPMorgan, Citigroup, Wells Fargo, Goldman Sachs, BlackRock, Bank of America, Morgan Stanley, and American Express are all scheduled to report revenue, providing crucial insights into the health of the financial sector and broader economy.

The combination of political uncertainty, economic data scarcity, and the opening of earnings season creates a complex environment for investors. The Trump administration’s tariff announcement represents the latest escalation in US-China trade tensions, which have historically created volatility across global markets. The rapid recovery in both crypto and traditional markets suggests that investors may be looking beyond the immediate political headlines toward fundamental economic indicators.

The ongoing government shutdown complicates the Federal Reserve’s ability to make data-driven decisions, potentially limiting the impact of Chair Powell’s upcoming speech. Without access to comprehensive economic data, the Fed may maintain its current policy stance regardless of market conditions. This uncertainty places additional importance on the manufacturing data from New York and Philadelphia, as well as the earnings reports from major financial institutions, which could provide alternative indicators of economic health.

For cryptocurrency markets, the weekend events demonstrated both the vulnerability created by excessive leverage and the resilience of underlying asset values. The rapid recovery to previous trading ranges suggests that despite the historic leverage flush, fundamental interest in Bitcoin, Ethereum, and other digital assets remains strong. As markets normalize, attention turns to how traditional financial institutions reporting earnings this week will address digital assets in their forward guidance and whether economic data will support continued risk asset appreciation.