The cryptocurrency market has taken a sharp turn, with investor sentiment plummeting into "Fear" territory following President Trump's announcement of increased tariffs on Chinese goods. Bitcoin, which had recently reached a record high, experienced a significant plunge, dragging down the broader crypto market.
On October 10, 2025, President Trump declared his intention to impose a "massive increase" in tariffs on Chinese imports in response to China's new export restrictions on rare earth materials. These materials are critical for various industries, including technology, defense, and semiconductor manufacturing. Trump communicated his decision via a post on Truth Social, stating that China's actions were "aggressive" and "unprecedented," and would affect nearly every product they produce. He further stated that he was to meet President Xi in two weeks at APEC in South Korea, but now there seems to be no reason to do so.
The announcement immediately triggered a wave of selling across digital assets. Bitcoin's price plummeted from approximately $117,000 in early afternoon to below $108,000. At one point, Bitcoin was down roughly 10%, with many other cryptocurrencies experiencing even more drastic drops of 20-40%. While it recovered to around $113,000, the volatility remained high. Other cryptocurrencies, including Ethereum and Solana, also experienced significant losses. Ethereum fell below $4,000, while Solana neared the $200 mark.
The renewed trade tensions between the U.S. and China have injected considerable uncertainty into the market. Analysts attribute the sell-off to a flight from risk assets as investors brace for further volatility in both traditional and digital markets. The tariff measures, intended to pressure China on trade and manufacturing, have increased market risk, prompting many crypto investors to shift their funds to stablecoins or other safer assets.
The Crypto Fear and Greed Index, a measure of market sentiment, has reflected this shift, moving into "Fear" territory. This index ranges from 0 to 100, with lower values indicating extreme fear and higher values indicating extreme greed. A low value suggests investors are fearful, potentially creating buying opportunities, while a high value indicates investors are overly greedy, suggesting the market may be overheated and due for a correction. The index is calculated based on factors such as volatility, market momentum, social media trends, and Bitcoin dominance. As of today, the index stands at 27, signaling "Fear" in investor sentiment.
The broader financial markets also reacted negatively to Trump's announcement. The S&P 500 and the Nasdaq both fell by 2% and 2.7%, respectively, as risk assets generally declined. Gold, often seen as a safe-haven asset, rose by more than 1%.
The situation is further complicated by the ongoing U.S. government shutdown, which has left agencies like the Securities and Exchange Commission (SEC) operating with limited staff. This has resulted in delays in the review and approval processes for pending cryptocurrency-related filings.
The escalating trade tensions and the potential for a full-blown trade war have created a sense of déjà vu for the global economy. Similar events in the past have rattled markets and impacted valuations. The current situation raises concerns about the potential strain on the global technology supply chain, particularly in sectors critical to digital assets, such as semiconductors, AI, and blockchain infrastructure.
