Cryptocurrency prices plunged sharply, with Bitcoin dropping more than 14% from its recent highs and smaller altcoins losing up to 70% of their value within hours. This sudden crash was not triggered by a single event but resulted from a combination of political shocks, market instability, and panic among investors, reports Baltimore Chronicle.
At the end of last week, President Donald Trump announced a 100% tariff on all Chinese technology imports and imposed new export controls on critical American software. This move reignited fears of a trade war between the two largest economies in the world. When markets sense political or economic instability, investors typically move their money into safer assets like gold or government bonds, withdrawing from riskier investments such as cryptocurrencies. Since the crypto market operates 24/7, it absorbed the full impact of this panic, while traditional stock markets were closed over the weekend.
However, political tensions were only the trigger. What made this event particularly devastating was the high leverage in the cryptocurrency market. Many traders used borrowed funds to place large bets, expecting Bitcoin and other coins to continue rising. This strategy, known as leverage, can magnify gains when prices increase but can lead to catastrophic losses when prices fall. As Bitcoin’s value dropped, millions of leveraged positions were automatically liquidated to cover losses. This wave of forced sales created a domino effect, sending prices plummeting even faster. Analysts estimate that within just 24 hours, positions worth over $19 billion were liquidated, marking the largest single-day loss in cryptocurrency trading history.
The situation was further aggravated as major exchanges struggled to handle the surge in transactions. Rapidly operating algorithms automatically triggered additional sales, draining market liquidity. Another contributing factor was concern over the Bitcoin mining industry. Most mining equipment comes from China, and amid the new trade restrictions, many investors feared rising costs or disrupted supply chains. This heightened nervousness in the crypto market, intensifying losses as sellers continued to dominate.
Earlier we wrote that Bitcoin Hits All-Time High as Investor Interest Grows.
