Largest Crypto Crash in History Erases $19 Billion

October 21st, 2025
James Savin

Following President Trump’s announcement of a mass increase in the US tariff rate on Chinese imports, crypto markets experienced a panic as investors scrambled to ditch their holdings. Over $19 billion were lost, with highly leveraged traders experiencing the hardest hit. Many lost their life savings, especially individual investors.

On October 10, Trump posted on Truth Social, “China has taken an extraordinarily aggressive position on Trade,” and in response, that the US would, “starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying.”

Although crypto is intended to be a separate, unregulated currency, independent from international politics, the crypto market is not immune to shocks. Institutional investors treat cryptocurrencies as they would a high-risk investment. When major geopolitical conflict seems likely, as it did when Trump announced massive tariffs on China, investors dump crypto in favor of more stable investments, like gold.

Institutional involvement in the crypto market has spiked in the past few years. One study this past January found that 85% percent of institutional investors increased allocations to digital assets and digital assets-related products in 2024, and in 2025, 59% planned to allocate over 5% of their assets under management to cryptocurrencies. As hedge fund, ETF, and bank capital have grown into this sector, they have begun to overtake the initial majority demographic of retail(private individual) investors. This change made crypto markets far more prone to dumps during times of economic uncertainty.

This crash has been exacerbated by record high overextension. Many traders, especially retail, use leverage to increase the amount of capital they have available to trade. Using leverage is a method of investing with money that a person does not currently have—a type of financial gambling. Individuals borrow funds to invest, knowing that if they profit, they profit by a substantial amount more than they would have if they had not had access to those funds. Leverage is, however, a double-edged sword. Losses are equally impacted. If someone trades with a leverage of 10%, also referred to as a 10:1 leverage, that means they are using ten times as much money as they personally have invested. For every one dollar that they are trading with, their leverage matches it with nine more.

Within two days of Trump’s tariff announcement, Bitcoin’s value dropped 8.34%. Many altcoins (short for alternative coins—essentially, any cryptocurrency that isn’t Bitcoin) lost 40% of their value within minutes of the announcement. To leveraged traders, their loss is multiplied by the leverage they’re investing with. For someone using 10% percent leverage, an 8.34% dip in their portfolio corresponds to an 83.4% loss in their initial investment—as well as 83.4% of the money they were borrowing. A 40% dip in a trader’s portfolio is catastrophic. It would correspond to a 400% loss of their initial investment, and a 400% loss of the money that they were borrowing.

Many trading platforms have what is called a maintenance margin. Because crypto is a largely unregulated market, maintenance margins are often much lower than in regulated markets. Crypto platform margins typically range from 0.5-5%. If equity in the account falls below the maintenance amount and whichever fees the account has incurred, the platform will force a liquidation. A lot of retail investors, especially influencers, put their entire life savings in their crypto investments. Let’s say someone’s initial investment is $100,000, with 10% leverage, and a 1% margin. If their investments hit a 9% loss, they will be force liquidated—leaving them with only 10% of their initial investment, or $10,000.

One man, Nick Howard, lost $16,000—half his life savings—in the wipeout. "I feel like I am in the middle of, you know, a trauma response," Howard says. "It's kind of a numb feeling for me right now." He’s among countless others searching for a way out of the financial hole the crash put them in. Ukrainian crypto trader Konstantin Galich was found dead in his Lamborghini October 11th, less than a day after the wipeout, with a gunshot wound to the head. His death is being investigated as a suicide.

The crash serves as a reminder of how important it is not to overextend on investments. Some argue that investors will only become more dependent on leveraging in a desperate attempt to make back the money they’ve lost. It remains to be seen whether this incident will prompt more responsible investment, or only spur on bad habits.