Bitcoin Plunges 12% After Trump Tariffs Trigger $19B Liquidation

The catalyst for Bitcoin’s historic crash came from Washington, not Wall Street. When former President Donald Trump announced 100% tariffs on goods from China around 5 p.m. Eastern Time on Friday, October 10, traditional markets had already closed for the weekend. This timing proved crucial, as cryptocurrency markets became the sole outlet for global investors to express their shock at the dramatic escalation in trade tensions between the United States and China. According to Marcin Kazmierczak, co-founder of crypto oracle provider RedStone, this unique circumstance concentrated all market reaction into the crypto space, creating unprecedented volatility.

Bitcoin had been trading comfortably above $121,000 on Friday morning before the announcement, but plunged to as low as $106,000 in the afternoon according to data from crypto price aggregator CoinGecko. The 12% drop represented one of the most significant single-day declines during what has otherwise been a historic bull run for the cryptocurrency. While the Trump tariff announcement served as the immediate trigger, the underlying vulnerability came from the massive growth in crypto derivatives trading, particularly perpetual futures contracts that have exploded in popularity in recent months.

The real damage occurred not among traditional Bitcoin investors but in the crypto derivatives market, where traders use borrowed funds to amplify their positions. The $19 billion in liquidations recorded within 24 hours marks the largest single-day liquidation event in crypto history, surpassing even the aftermath of the FTX collapse in 2022 and the COVID-induced market crash in 2020. Some analysts suggest the actual damage may have been even greater, potentially exceeding $30 billion due to underreporting from centralized exchanges.

Kazmierczak explained the mechanics of the crash: ‘The flash crash in token prices caused collateral values to plummet momentarily, triggering massive liquidation cascades. Roughly 1.6 million traders saw their positions evaporate. Even positions that might have survived a more gradual price decline were wiped out in seconds as exchanges’ liquidation engines worked through overleveraged positions.’ This systematic forced closure of positions created a domino effect, where each liquidation put additional downward pressure on Bitcoin’s price, triggering further liquidations in a destructive feedback loop.

Contrary to what might be expected during such a dramatic market move, this wasn’t primarily a retail investor panic. As Kazmierczak noted, ‘The people who got liquidated weren’t retail investors. They were crypto natives and traders using leverage on centralized exchanges. This was painful, but it wasn’t a retail flush. It was a leverage bloodbath.’ The distinction highlights how sophisticated market participants using advanced trading strategies bore the brunt of the losses.

At the heart of the liquidation event were perpetual futures contracts, or ‘perps,’ which have become increasingly popular in crypto markets. Unlike traditional futures with expiration dates, perps allow traders to bet on Bitcoin’s price direction indefinitely. However, this doesn’t mean traders can maintain positions without cost. Exchanges use funding rates to keep contract prices aligned with Bitcoin’s spot price, creating a mechanism where traders pay or receive fees based on market sentiment.

The real danger emerges when leverage enters the equation. Leverage allows traders to borrow funds from exchanges to increase their position size dramatically. For example, a trader using 10x leverage can turn a $100 investment into a $1,000 position. While this magnifies potential gains—a 5% price increase would generate 50% returns—it equally amplifies losses. If Bitcoin’s price falls enough to wipe out the initial $100 margin, the exchange automatically liquidates the position to protect itself from further losses.

During normal market conditions, traders might receive margin calls warning them to add more collateral. But in rapid price movements like Friday’s crash, there’s simply no time to react. As Kazmierczak observed, ‘When the price takes a wild swing, traders aren’t left with much time to add more margin to cover the losses.’ This creates the perfect conditions for liquidation cascades, where forced selling begets more forced selling in a vicious cycle.

Despite the historic scale of the liquidation event, Bitcoin has shown remarkable resilience. The cryptocurrency has recovered to around $115,000, representing an 8.5% rebound from the crash lows. This recovery suggests that underlying market optimism remains intact, with investors viewing the event as a temporary disruption rather than a fundamental shift in Bitcoin’s bull market trajectory.

However, the event raises important questions about the growing dominance of leveraged trading in crypto markets. With over $75 billion in open interest across Bitcoin futures markets and specialized platforms like Hyperliquid gaining popularity, the potential for similar events remains significant. The very mechanisms that enable sophisticated trading strategies also create systemic vulnerabilities that can amplify market moves beyond what fundamentals might justify.

The October 10 liquidation event serves as a stark reminder that while cryptocurrency markets operate 24/7, they remain deeply connected to traditional geopolitical events. The intersection of Trump’s tariff announcement, after-hours trading conditions, and the massive growth in crypto derivatives created a perfect storm that wiped out $19 billion in leveraged positions. As the perpetual futures market continues to expand, market participants may need to reassess their risk management strategies to account for the amplified volatility that leverage can introduce during periods of geopolitical uncertainty.