“Black Friday 2025”: Record $16B Crypto Liquidation Follows US–China Tariff Shock

What began as an ordinary Friday ended in a historic crypto crash. Within a few hours, leveraged long positions worth approximately $16 billion were liquidated – the largest liquidation shock the crypto market has ever experienced. Bitcoin plummeted by 15 percent at one point, Ethereum fell below $3,900, Solana lost 40 percent, and numerous altcoins like Atom and Ethena were virtually wiped out.

But the trigger didn’t come from the financial world, but from geopolitics: On October 9th, China declared that the export of products containing more than 0.1 percent rare earths would henceforth require a permit. In doing so, Beijing used its access to strategically important raw materials as a political weapon – a move that quickly spread on “right-wing Twitter.”

Trump reacts – and triggers a wave of panic in the crypto market

Just one day later, on the afternoon of October 10, Donald Trump responded by announcing a 100 percent punitive tariff policy on Chinese goods via Truth Social. Just 30 minutes before his announcement, noticeably large short positions had been opened on the decentralized exchange Hyperliquid – these traders later closed their bets with profits of over $190 million. Suspicion of insider knowledge is rife.

Following Trump’s announcement, the Bitcoin price plummeted from $117,000 to $104,000—a drop of around 15 percent in just 20 minutes. Similar scenes unfolded in other crypto markets: ETH, XRP, and SOL lost double digits, and open interest halved overnight.

Auto-deleveraging: The “nuclear” emergency mechanism

Due to the enormous crypto losses, many exchanges lacked the liquidity to absorb forced selling. Platforms like Binance, Hyperliquid, and almost all centralized exchanges were forced to resort to a drastic measure: auto-deleveraging (ADL).

This involves forcibly closing profitable short positions to plug open holes in the exchange’s balance sheet. Only a few providers, like Lighter xyz, were spared – albeit at the cost of a system outage lasting several hours.

DeFi holds its ground – stablecoins falter

Even the DeFi sector was in chaos. The lending protocol Aave experienced the largest stress test in its history, with $180 million in liquidations – and passed it “fully automatically and flawlessly,” according to founder Stani Kulechov.

USDe, an algorithmic stablecoin, lost value drastically, temporarily falling to $0.62. At the same time, USDT traded at a premium of 0.6 percent – ​​a classic flight-from-the-wallet behavior in times of maximum uncertainty.

Numerous on-chain services such as Rabby and DeBank failed, API connections broke down, and individual users reported strange “positive slippage”: Some traders were able to purchase tokens such as BNB or wETH on decentralized platforms at absurdly low prices.

The long road to recovery

Experts now expect a multi-stage bottoming process. After the liquidations, crypto market makers will initially withdraw to balance price differences between spot and futures markets. Only when data feeds and liquidity stabilize again will slow buying begin. This process is likely to take days – exacerbated by the low weekend volume, as spot ETFs are closed.

In the long term, much depends on the geopolitical environment. If tensions between the US and China escalate further, the recovery could be delayed. At the same time, however, the crash also offers a stress test that shows which exchanges, protocols, and market participants are truly robust—and which will collapse in the next shock.

Conclusion

“Black Friday 2025” will go down in crypto history as a warning: political decisions can wipe out trillions in market capitalization in minutes. The path back to normality will be gradual – but those who survive this phase could ultimately benefit from a healthier, more resilient market structure.

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(Featured image by Kindel Media via Pexels)

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