Opinion The political agenda continues to play an important role in the price of cryptocurrencies. The US president’s abrupt move against Chinese trade has caused a collapse in the cryptocurrency market. Another reason is the attack on Binance. But what will happen to the market next?
A New Round of Trade War
Trump is updating tariffs on imported goods in the United States. As of November 1, the US president has threatened to impose additional 100% tariffs on all Chinese products. Considering that all Chinese goods are already subject to a 30% tariff, this would result in a staggering, virtually prohibitive markup.
Some goods will simply disappear from the American market, while others will become more expensive. In any case, this will have an impact on Americans. What is the reason for Trump’s attack on China? The American president himself claims that the main reason is the actions of the Chinese authorities, who plan to tighten control over the export of rare-earth metals starting November 1. Rare-earth metals are crucial for the production of electronics.
China has already responded to Trump’s actions. Representatives of the People’s Republic of China declared the inadmissibility of protective duties, promising that China “will take measures to protect its legitimate rights and interests.”
Given everything that was happening, the reaction of the crypto market was quite adequate — panic, which resulted in an instant collapse (flash crash).
The cryptocurrency market’s peak
The statements made by American and Chinese government officials in the form of mutual economic threats have added to the already high level of uncertainty in the world. The psychological uncertainty of cryptocurrency holders has triggered mass sales that have reached unprecedented levels.
In just 10 days, cryptocurrency has seen the total liquidation of long (buy) margin positions (those using leverage) worth $16.7 billion. This is eight times more than in the previous nine trading days of October.
Source: coinglass.com
In fact, this situation was not new. In April, during the first wave of Trump’s “tariff wars,” the price of cryptocurrencies also experienced a significant decline. However, as the American president’s rhetoric became less aggressive, the digital assets began to rise again. But will this happen again?
Cryptocurrency Market Prospects
To answer this question, it is necessary to be aware of what actions Trump will take in the future. Obviously, this is impossible to do, given the nature of the US president, which he has revealed during his time in office.
However, it is possible to analyze what has happened in the cryptocurrency market and draw conclusions.
If we disregard the nervousness of investors, nothing extraordinary has happened. Yes, the price of some coins has dropped sharply. For example, Toncoin fell by about 80% in just a couple of hours, and then recovered significantly. As a result, the daily drop in this coin was less than 20%. If we look at other coins, Bitcoin has lost about 10.5% in recent days, Ethereum has lost slightly less than 22%, and Solana has lost more than 28%. The prices have drifted back to the lows of August. But there is no reason to talk about a massive collapse yet.
Representatives of the Bitwise investment company, the one that has its own spot ETFs for ether (ETHW) and bitcoin (BITB), agree with this point of view. Senior investment strategist Juan Leon hinted:
“The best time to buy bitcoin comes when its price is pulling down in wider spurts.”
And Bitwise investment director Matt Hougan recalled the psychology associated with the buy the dip strategy.;(buying on the downside):
“It always feels bad when you buy on the downside. The bottom comes when the mood is in decline. But writing down numbers can be a good form of discipline.”
But there is another important caveat.
Attack on Binance
Users of the largest crypto exchange Binance have reported difficulties while trading certain tokens, including USDe, BNSOL, and WBETH, as well as forced closures of trading positions for these tokens.
Wu Blockchain suggested that this was the result of a pre-planned attack against the price oracle, the BNSOL/WBETH service that connects the blockchain to external systems, as well as positions with massive leverage in USDe stablecoins. The timing of the attack, which occurred between Binance’s announcement of the oracle update on October 6 and its actual implementation on October 14, supports the theory of a pre-planned attack. The attack itself began shortly before the massive collapse of the crypto market.
A crypto influencer with the username ElonTrades said that the unknown attackers had recently opened short positions on Hyperliquid for Bitcoin and Ether, and the “massive dump” of USDe occurred just a few minutes before the news about the “Trump tariffs” was released. The stablecoin exchange rate critically detached itself from the dollar, and then a chain reaction followed with the fall of the largest cryptocurrencies, which gave “unknown shortists” about $192 million in net profit, ElonTrades explained.
Richard Teng, CEO of Binance, said that the management of the platform is aware of the problem with oracle, regrets what happened and urges all those affected to contact technical support. Teng agreed that “the last 24 hours have been hectic” and that “volatility is an integral part of the market.”
Later, Binance co-founder Yi He also got in touch and assured that the exchange would provide compensation to all those who suffered losses due to the platform’s fault.
Binance’s problems have provoked a wave of controversy regarding the root causes of the market collapse. It is worth clarifying: if we talk about the cumulative liquidations in the market, then it was Trump’s statement that became their catalyst. The crypto market reacted with a fall following the stock market.
Despite the technical difficulties, Binance did not become a record holder for individual positions in liquidations. For example, the liquidation of long positions on the Bybit exchange exceeded Binance’s similar figures several times — $4.3 billion versus almost $1.4 billion, respectively.
Source: coinglass.com
Binance founder Changpeng Zhao (Changpeng Zhao) said that he personally is not sure about the authenticity of “this story” with the attack and hopes that someone will be able to confirm it.
Conclusion
It is not worth making far-reaching conclusions about the crypto market. The drop in the value of Bitcoin and altcoins is the result of panic caused primarily by Trump’s announcement of tariffs on Chinese imports and China’s response. Given that the decline in prices was abrupt, it is likely that this is not the beginning of a long-term global correction.
This material and the information within it do not constitute individual or other investment advice. The editorial opinion may not coincide with the opinions of analytical portals and experts.
