Trump’s Tariff Threat Sparks Unprecedented Crypto Market Shock

The digital asset market experienced an extraordinary upheaval following former President Donald Trump's announcement of a potential 100% retaliatory tariff against China. This single declaration catalyzed the liquidation of leveraged positions valued at $19 billion (27 trillion won) in just 24 hours. Ripple effects left traders and investors grappling with market-wide uncertainty.

While the full extent of the damage remains veiled, concerns loom over which key players or decentralized finance (DeFi) projects bore the brunt of the fallout. This dramatic event has drawn unsettling comparisons to the Terra-LUNA collapse in 2022, where cascading aftershocks destabilized crypto projects long after the initial crash.

Market Meltdown Ignited by Trump’s Announcement

On November 11, Bloomberg reported how Trump's so-called “100 percent tariff shock” sent tremors through the crypto industry. Analysts noted that the fallout was exacerbated by the market's illiquidity and the inherent volatility amplified by automated liquidation mechanisms.

Forced liquidations unfolded swiftly, beginning late Friday in New York and extending throughout the weekend. According to CoinGlass data, over 1.6 million traders suffered financial losses during this period. Liquidations were disproportionately concentrated in altcoins—cryptocurrencies other than Bitcoin (BTC) and Ethereum (ETH). Lacking the stability and liquidity of their more prominent counterparts, altcoins proved particularly vulnerable to the sudden market turbulence.

Institutional Meltdown or Retail Investor Wipeout?

Uncertainty persists over whether substantial losses stemmed from the collapse of a single institutional “whale” or the collective impact on countless smaller retail investors. Matthew Hougan, Chief Investment Officer of Bitwise Asset Management, remarked, “Our partners haven’t reported losses beyond standard price swings."

Despite widespread speculation about which entities sustained the heaviest blows, Bloomberg’s attempts to ascertain the involvement of significant market makers revealed no confirmed institutional collapses. Unlike traditional financial systems, crypto markets operate on automated sell-off mechanisms, which trigger cascades of liquidations as soon as collateral reserves deplete. Analysts also speculated that the timing of Trump’s announcement—before Asian and European markets opened—exacerbated the market chaos.

Liquidity Crunch and Automated Selloffs Further Accelerate Decline

The market’s dramatic plunge can largely be attributed to a combination of liquidity shortages, automated liquidation mechanisms, and the controversial deployment of Auto-Deleveraging (ADL). Hyperliquid, one of the major cryptocurrency exchanges, recorded $10 billion in liquidations, exceeding even Binance, the world’s largest exchange.

Zahir Ebtikar of Split Capital underscored the fragility of altcoins, stating, “Altcoins have limited buy orders, and simultaneous collapses across multiple assets can freeze market functionality.” ADL—an automatic risk-reduction tool used by exchanges during periods of extreme market volatility—drew heavy criticism. Spencer Harlan, Global Head of OTC at GSR, noted, “ADL disproportionately disadvantages investors managing complex portfolios.”

Adding to the controversy, Hyperliquid’s internal treasury, known as Hyperliquid Pool (HLP), reportedly profited $30 million amid the turmoil by acquiring and liquidating loss-making investor positions. This raised eyebrows among market participants regarding exchanges taking opportunistic stances during crises.

Crisis-Grade Altcoin Sell-Off

The sell-off in the altcoin market transcended routine liquidations, resembling what Tarun Chitra of Gauntlet Networks described as “crisis-level” spot market activity. Investors saw altcoins rapidly dumped—exacerbating price declines and exposing the precarious footing of these smaller-cap digital assets.

Edward Chin, CEO of Parataxis, issued a sobering prediction: “The aftershocks of this crash could result in substantial losses for hedge funds and market makers in the days ahead.” The market’s instability casts a long shadow, leaving both retail and institutional investors grappling with uncertainty over the residual damage.

Investors Braced for Extended Turbulence

The aftermath of Trump’s tariff announcement has left the cryptocurrency market unnerved, with stakeholders closely monitoring the fallout. As details gradually emerge regarding who sustained the greatest losses, the broader industry remains on edge. Concerns about ripple effects spilling into hedge funds, DeFi projects, and altcoin-heavy portfolios linger.

For now, the digital asset market stands at a critical juncture. This latest turmoil serves as a stark reminder of the unpredictable nature of the crypto ecosystem and the dangers of external geopolitical triggers colliding with an already volatile marketplace.