October 2025 trade war scare / (Part V) Just a little trade-warring and $19 billion in liquidations
Introduction
It was late October, the year 2025: global cryptocurrencies were taking a hammering as mounting geopolitical risks clashed with excessive leverage. Bitcoin dropped more than 14%, a move that liquidated over $19 billion in long positions, while Ethereum and other leading altcoins also slipped. Here, we explore the main forces at play, market barometers and longer-term insights from this mid-cycle reset.
Geopolitical Catalyst: Fears of U.S.-China Trade War
One mere social-media missive from former President Trump — threatening new 100% tariffs on Chinese imports and export controls on critical software — rekindled full-fledged trade-war fears. So-called risk-on investors shed digital assets as equities and oil prices dropped. Gold briefly rallied above $4,000 an ounce, highlighting the rush into more traditional havens.
Leverage and Liquidation Cascade
The fact that crypto is a high-beta asset made the sell-off worse:
• More than 1.6 million traders were liquidated in 24 hours.
• Total liquidations were worth over $217 million, most of them long positions.
• Bitcoin and Ethereum represented about $98 million in losses.
Automated margin calls set off what amounts to a feedback loop: Each time an investor or trader was forced to sell something at fire sale prices, prices dropped further, causing more investors and traders to be called on by their lenders to cough up more cash — and making the collapse start happening in fast forward.
Market Moves:A Mid-Cycle Reset, Not a Bear Market
As painful as this is, analysts see it more as a good deleveraging rather than the beginning of a long decline:
• Open interest in futures dropped from a peak of $52 billion, keying off an 18% draw down of Bitcoin.
• Leverage levels have dropped to the 61st percentile — in line with historical averages.
• On-chain and Bitcoin treasury activity is still strong, indicating that institutional interest remains high.
• Diverging funding rates and high implied volatility suggest near-term uncertainty while fundamental sentiment remains skewed to the upside.
Structural Lessons and Risk Management
Two huge weaknesses were exposed by this episode:
• Too much trading on borrowed money and automated trades can exacerbate shocks.
• Crypto markets are still closely correlated to macroeconomic and geopolitical events, complicating the idea of digital assets as “uncorrelated.”
Longer term, episodic deleveraging may go a long way to promote more prudent valuation and sounder risk frameworks.
Into the future: maturing and macro sensitivity
As painful as it is, October’s correction should be seen in the context of crypto’s developing maturity. Institutions are still accumulating treasuries, on-chain fundamentals remain strong and leverage is more restrained. But market participants should be on their toes: changes in policies around the world and geopolitical flashpoints will continue to have an impact on digital-asset prices.
Key Takeaways
— Trade-war threats were the catalyst for the October 2025 crypto crash.
Forced sales surpassed $19 billion, with Bitcoin and Ethereum taking the hardest punches.
— Market data implies a “reset” of deleveraging rather than an ongoing bear market.
Automated margin calls and high leverage lay bare structural fragilities.
Cryptos are still reacting to macro and geopolitical risk.
Learn How to Start Investing in Crypto in 2025 . And Navigating the Crypto Jungle: A Beginner;s Guide to Smart Investing
Conclusion
The October slide is a reminder of crypto’s interconnectedness with world events, and the risks of unleashed leverage. As the sector becomes more mature, traders and investors should focus most on solid risk management, expect cyclical resets and acknowledge that digital assets are unique but not insulated from existing financial systems.
