Trump’s Tariffs and Global Trade Fears Trigger Market Meltdown: $2.2 Billion Liquidated

14c8595dcb706147c0a2722b0dd192c4

In the turbulent world of cryptocurrency, a sudden market shift can be caused by anything from technological advancement to changes in regulations. However, lately, it has been the implementation of new tariffs by U.S. President Donald Trump that has triggered a major meltdown in the crypto market. Over $2 billion in cryptocurrency was liquidated within a span of 24 hours.

The crisis, which shook the crypto market, increased anxiety over the possible global trade war and how this would influence the stability of markets. The chief executive officer of Wintermute, Evgeny Gaevoy, spoke about the issue at hand and revealed what sparked the meltdown, the link between it and other external economic influences, and the part played by the market makers in amplifying selling pressure.

Tariffs and Their Implications on the World Market

On August 2024, President Trump signed an executive order imposing tariffs on imports from China, Canada, and Mexico. This bold move aimed to address concerns about trade imbalances and unfair practices in global commerce. However, the immediate impact of this executive decision was not limited to the traditional markets alone. Crypto markets, which had been growing steadily in recent months, saw a massive drop in value as fears of a global trade war took hold.

Panic in the investor world, both traditional and cryptocurrency markets, was created by the announcement, which brought about widespread sell-offs. This liquidation of digital assets wiped out over $2 billion worth of cryptocurrency sold within 24 hours, effectively erasing considerable portions of market value. Analysts believed that the fear of a global trade conflict pushed the market into a downward spiral, as investors frantically divested their holdings in an increasingly unstable environment.

Wintermute CEO Evgeny Gaevoy on the Market Meltdown

The head of Wintermute, one of the largest cryptocurrency market-making firms, Evgeny Gaevoy, said the crash was not caused by insider trading or even intentional manipulation of the market. Instead, it was because of financial externalities connected to traditional finance. “While market makers like us play a very important role in providing liquidity, they are not causing the crash themselves, but may amplify selling pressure,” he added.

Gaevoy dismissed such claims on a social media site X that Wintermute or another large firm were intentionally pushing the crypto prices lower to manipulate the market. According to him, Wintermute’s on-chain activity was just about regular inventory shifts between exchanges because of liquidity. He also emphasized that the problem was the volatility of the market, which came from the fact that the administration of President Donald Trump had applied tariffs and had left the entire world in an uncertain position in terms of its trade policies.

Gaevoy explained that crypto markets, just like traditional financial markets, are highly sensitive to macroeconomic events. “Our little crypto market is now very directly linked to the real world outside,” he said, urging traders to understand the broader economic trends that are shaping market movements. For Gaevoy, the key to successfully navigating the crypto space in an increasingly interconnected world lies in understanding the impact of global financial decisions and how they affect digital assets.

The Role of the Market Maker in the Crypto Crash

Market makers, in this case, Wintermute, are supposed to provide liquidity to the market. This ensures that there is sufficient buy and sell activity so that trading can move along very smoothly. However, during extreme periods of volatility, their own activities will sometimes feed pressure to send prices lower.

In the case of the recent market crash, it was reported that several major market makers were involved in offloading substantial amounts of Ethereum (ETH) to maintain liquidity levels. In August 2024 alone, five major market makers liquidated a total of 130,000 ETH, which had been valued at approximately $290 million. This included Wintermute’s sale of over 47,000 ETH, as well as significant sales by Jump Trading and Flow Traders.

The wave of selling brought the price of ETH down dramatically, from above $3,000 to below $2,200. As the sales were needed for stabilization of liquidity the same panics in the market further resulted in degradation of prices. The Blockchain analytics firm Scopescan confirmed the occurrence of these transactions, which indicated the contribution of market makers to the weakening of the market.

Gaevoy, however, clarified that Wintermute was not acting to manipulate the market. The company was reacting to the liquidity issues caused by the sudden market volatility. He dismissed conspiracy theories that firms like Wintermute and Binance had conspired to engineer the crash and called on traders to focus on the underlying economic factors at play.

Bybit CEO’s Estimate: $10 Billion in Crypto Liquidations

While Wintermute’s CEO attributed the market turmoil to broader economic developments, other industry leaders have weighed in on the extent of the damage. According to Ben Zhou, the CEO of Bybit, one of the largest crypto exchanges, the total liquidations across the crypto market could have exceeded $10 billion, much more than what had been reported earlier. This estimate underscores the scale of market crash, investors were desperate in cutting their losses as uncertainty associated with global policies of trade made it difficult.

The estimate made by Zhou was based on the liquidation of long and short positions in the major cryptocurrencies like Bitcoin and Ethereum. Bitcoin plummeted below $100,000, and all the other altcoins followed. It was one of the largest sell-offs that had been seen in the crypto market for quite some time. Those who traded using leverage took a massive hit because the value of their positions fell dramatically.

Global Trade Fears and Crypto Market Sentiment

One of the main reasons driving the massive liquidation in the crypto market has been the global trade war panic. Analysts have pointed toward the uncertainty behind international trade policies as one major cause of a market instability concern. According to Ryan Lee, chief analyst at Bitget Research, the fact that there lacked clarity around international trade policies and how they affect the global and regional economies went a long way in affecting sentiment in the marketplace.

With regard to tariffs applied across key trading partners, including China, Canada, and Mexico, concern mounted that the country would truly become embroiled in a full-scale trade war, with decidedly deleterious effects on the global economy. Fears like these led investors to scramble for safe assets, removing capital from such riskier markets as cryptocurrency. The falling prices of cryptocurrency then served only to exacerbate matters, as it enhanced liquidation triggers, pulling prices further downward and enlarging the decline in the market.

The Challenge of Navigating a Crypto Market Influenced by Traditional Economic Events

The recent market meltdown highlights just how challenging trading in the cryptocurrency space has grown to be. As crypto markets become more integrated with traditional financial markets, traders are increasingly faced with the challenge of understanding the broader economic forces that can impact digital assets.

According to Gaevoy, this is both a challenge and an opportunity for crypto traders. It is certainly more challenging to navigate a market that is so closely tied to global financial developments, but it also opens new avenues for analysis. Traders who understand the intersection between traditional finance and cryptocurrency will be better positioned to make informed decisions and manage risk effectively.

But at the same time, the new reality leaves crypto markets even more open to external shock. Tariffs of Trump together with more widespread geopolitical changes easily shift the balance in the general mood in markets. And all the time trading moves on where central banks start making more actions to define new prospects for money, and common financial events and announcements influence markets as never before.

TRUMP INAUGURATION 2025 157 1737405023983 1737415094667 1

5 Frequently Asked Questions about the Market Meltdown Triggered by Trump’s Tariffs

What was the cause of the recent market meltdown in the cryptocurrency space?

    The market meltdown was primarily driven by the news of new tariffs imposed by U.S. President Donald Trump on imports from China, Canada, and Mexico. These tariffs heightened the fear of a global trade war, causing panic in both traditional financial markets and the cryptocurrency space. It led to mass sell-offs that resulted in more than $2 billion in cryptocurrency liquidations within 24 hours.

    Did the market makers, like Wintermute, trigger the crypto crash?

      According to Wintermute’s CEO Evgeny Gaevoy, that was not intentional market manipulation to cause a crash. However, Wintermute-the market maker that contributed a fair share to selling pressure did in fact dump their assets because maintaining liquidity at those times demanded doing so; nevertheless, Gaevoy explains the market downturn wasn’t triggered due to a few manipulations or attempts on that side of Wintermute; external economic forces from Trump’s tariffs were key for the overall collapse.

      How did the tariffs affect the crypto market?

        The imposition of tariffs by President Trump sent global trade war fear into the investor psyche, with investors withdrawing their capital from risky assets, which included cryptocurrencies. This changed investor sentiment sent prices of digital currencies, including Bitcoin and Ethereum, plummeting with massive liquidation, adding fuel to the burning market decline.

        What was the quantity of cryptocurrency that was liquidated during the crash?

          Over $2 billion in crypto was liquidated within a 24-hour period after the tariffs announcement. In other instances, the total liquidations may have reached more than $10 billion within the crypto market, motivated by a fear of what may eventually turn out to be an all-out global trade conflict, as estimated by Bybit CEO Ben Zhou.

          Are there ways that traders can avoid witnessing such catastrophic market crashes?

            While the anticipation of the actual date of market crashes is hardly possible, getting to know about the macroeconomic factors, including trade policies, significantly determines the position of traders in the global financial market. In general, while crypto markets are more and more synchronized with the traditional financial system, knowledge of these above factors becomes a foundation for trading decision-making. Heed must also be paid to leverage used in trading and unpredictability of markets.

            By aparna

            I am Aparna Sahu Investment Specialist and Financial Writer With 2 years of experience in the financial sector, Aparna  brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna  has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna  holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.

            Leave a Reply

            Your email address will not be published. Required fields are marked *