Core Insights - A sudden tariff announcement from U.S. President Donald Trump led to a significant selloff in global markets, particularly in the crypto sector, resulting in over $19 billion in leveraged positions unwinding within 24 hours [1] - The event highlighted the high level of leverage in crypto trading, with Bitcoin and Ethereum experiencing the largest losses, while altcoins faced even steeper corrections [3][4] Market Reaction - Over 1.6 million traders were liquidated, with nearly 87% of positions being long, indicating a strong market reaction to the tariff news [2] - Open interest in Bitcoin futures dropped by more than 30% during the selloff, reverting leverage levels to those last seen in May [5] Sentiment Shift - Funding rates turned negative across most exchanges, signaling a shift in market sentiment from optimism to caution [6] - Analysts described the situation as a "stress test" for market structure, revealing the increasing influence of derivatives and the limitations of algorithmic risk management during periods of volatility [6] Recovery Phase - By October 13, Bitcoin rebounded to above $114,000, recovering nearly 12% from the lows, while Ethereum rose to around $4,100 [7] - Spot Bitcoin ETFs experienced $420 million in inflows during the recovery, helping to stabilize prices [7] Altcoin Performance - Altcoins like Solana, XRP, and Avalanche showed modest rebounds, indicating selective risk appetite rather than a full market recovery [8] - The bounce was attributed to institutional buying and automated market makers rebuilding liquidity after the liquidations [8] Ongoing Volatility - Despite the recovery, implied volatility in Bitcoin options exceeded 50%, and futures spreads remained tight, reflecting caution among professional traders [9] - Analysts warned that a rapid buildup of leverage could lead to another significant unwind if macroeconomic conditions worsen [9]