The hardest-hit speculators had used borrowed money to bet on price moves, in what is known as leveraged trading. Sharp slumps in the price of digital currencies triggered crushing losses on these trades as positions were wiped out.
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Cryptocurrencies have struggled to recover since Trump’s announcement, with Bitcoin still down by 8.5 per cent from Friday, while Ethereum was also trading 12.8 per cent lower. Dogecoin is down 26.3 per cent.
The US president’s unexpected tariffs threat was in retaliation to China’s decision to introduce new export controls on global supplies of rare earths and critical minerals, which was announced just days earlier.
However, Beijing appears to have softened its stance over the weekend, with some investment experts questioning whether the market sell-off was triggered by a brief geopolitical misunderstanding.
Meanwhile, the latest bout of scrutiny comes after Trump’s administration was also caught up in claims of insider trading back in April. Several Democrats called for an inquiry after the president’s “Liberation Day” tariffs announcement on April 2 sent stocks plunging around the world, only to swiftly recover after he announced a pause.
At the time, Elizabeth Warren, a Democratic senator, wrote a letter to the Securities and Exchange Commission urging it to investigate whether Trump’s tariffs about-turn had “enriched administration insiders and friends at the expense of the American public”.
Senior White House officials have repeatedly denied claims of insider trading. It comes as global policymakers and finance ministers gather in Washington this week to attend the International Monetary Fund (IMF) autumn summit.
Worries about a looming stock market correction sparked by an AI bubble are expected to dominate at the meetings.
Kristalina Georgieva, the IMF managing director, warned on Wednesday ahead of the meetings that things could get ugly quickly, with the market bearing echoes of the dotcom bubble.
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“Valuations are heading toward levels we saw during the bullishness about the internet 25 years ago,” she said.
“If a sharp correction were to occur, tighter financial conditions could drag down world growth, expose vulnerabilities, and make life especially tough for developing countries.”
The Bank of England issued a similar warning last week, questioning whether tech stocks could live up to extremely high valuations. Such concerns are compounded by investors dumping shares in the world’s largest money managers over fears that their $US3 trillion push into private credit is headed for trouble.
The Telegraph, London
