Traders are betting big on a stock market crash as fresh U.S. trade tensions with Canada, China and Mexico spark fears of recession. Stocks are tumbling, crypto is cratering, and investors are shifting to safer assets as volatility surges.
Panic Selling Hits Stock Market TodayĀ
Traders are piling into options that profit from extreme stock market moves, signaling rising fear across Wall Street.
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The Cboe Volatility Index (VIX), which measures market volatility, saw a massive surge in call option purchasesācontracts that pay off if volatility spikes, which typically happens during a stock market downturn or crash.
Today, stock markets fell overnight after President Donald Trump vowed to impose 25% tariffs on Canada, Mexico, and China, fueling fears of a trade war and recession. The sell-off deepened after Canada and China announced their own retaliatory tariffs on U.S. goods.
The S&P 500 dropped 1.92%, while the tech-heavy Nasdaq lost 3.62%. The NYSE FANG+ Index, which tracks 10 highly traded and innovative tech and growth stocks, plunged 4.7% during Asian trading hours on Tuesday.
Market Turmoil Wipes Out Crypto Gains
Signs of bearish sentiment quickly spread to the crypto market. Bitcoin (BTC) plunged 10% to $83.1K as investors moved toward the safety of U.S. government bonds.
Ethereum (ETH) fared no better, sinking 13% below $2,100, while altcoins like Cardano (ADA) and Solana (SOL) suffered double-digit losses reversing yesterdayās gains from Trumpās strategic crypto reserve plans.
The total crypto market capitalization has dropped over 9% in the past 24 hours, now standing at $2.76 trillion, as per CoinMarketCap.
Massive Liquidations Shake Crypto Markets
Derivatives data shows over $863.7 million in crypto long positions have been liquidated in the past 24 hours, mirroring the defensive stance seen in stock options.
In total, more than $1 billion in crypto longs and shorts were wiped out, with Bitcoin and Ethereum leading the losses.
According to CoinGlass, over $373 million in Bitcoin (BTC) positions and more than $202 million in Ethereum (ETH) positions were liquidated in the same period.
Trumpās Canada, Mexico, and China Tariffs Stoke Recession Fears
Beyond market panic, concerns over U.S. economic growth have intensified.
Weak consumer and business data and Trumpās escalating trade war and federal workforce cuts fueling fears that inflation could impact the Federal Reserveās interest rate decisions.
Additionally, as U.S. tariffs on foreign trade partners take effect today, at least two countriesāCanada and Chinaāhave already announced retaliatory measures. China plans to impose 15% tariffs on a range of American agricultural and food products, while Canada has responded with a 25% tariff on U.S. goods.
Meanwhile, Mexicoās president, Claudia Sheinbaum, is expected to announce her response on Tuesday morning.
On The Flipside
- At the start of 2025, U.S. stocks and the dollar were expected to outperform global markets. However, the S&P 500 has gained just 1% this year, while the dollar has fallen 3% from its January peak against major currencies.
Why This Matters
The latest escalation in the U.S. trade wars has sent shockwaves through crypto and stock markets, fueling fears of a crash and a global recession. With traders betting big on more volatility ahead, marketsāboth traditional and digitalāare bracing for a turbulent ride.
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