Key Insights
- Trump tariffs-induced crypto market crash of Q1 and how it set the stage for all-time highs.
- Tariffs 2.0 and double top theory. How this led to the sentiment shift that has suppressed crypto in H2 2025.
- Macro headwinds in Q4: Large holder positioning as the Yen risked putting the global investor landscape on a chokehold.
There has been a crypto crash almost every year since 2020. Understanding the crashes and the reasons behind them may offer critical insights into understanding the market’s next move.
There were two major crypto market crash events in 2025 despite heavy bullish expectations. The first crash occurred in Q1 and extended to the second week of April.
This first crypto market crash resulted in a sharp liquidity flush. The total crypto market cap tanked $3.6 trillion just after mid-January to as low as $2.42 trillion by 9 April.
In other words, the market lost roughly $1.24 trillion within 3 months, thus constituting a major crash. This outcome was not triggered by cryptocurrency news but rather by macroeconomic factors.
The first crypto market crash of 2025 was triggered by Trump’s tariff wars. Investors pulled their funds from risk-on assets to avoid potential erosion, hence the market crash.
Tariff War 2.0 and Double-top Concerns Caused the Second Crypto Market Crash of 2025
The cryptocurrency market recovered aggressively from April to August after President Trump announced a pause in the tariff wars. This pause set the pace for a massive liquidity influx, which pushed some coins, including Bitcoin and Ethereum, to new historic highs.
Those ATHs also set the backdrop for the second major crypto market crash of 2025, and here’s how it started. The Trump administration threatened to reignite the tariff wars. This led to choppy price action in August.
Concerns of a double top emerged, with analysts and investors alike drawing parallels between the crypto market in 2021 and 2025. At around the same time, long-term holders sold off large amounts of their crypto holdings.
The threat of revived tariff wars was the spark, while heavy long-term holder outflows fueled the second crypto market crash of 2025. This further supported the double top theory, which mirrored similar observations in 2021 and aligned with the 4-year cycle theory.
This time, the total crypto market cap plummeted from an all-time high of $4.28 trillion on October 7 to $2.89 trillion by November 22. A $1.39 trillion drop, which was bigger than the previous crash and took a shorter duration.
Why Macro Factors Mostly Drove the Crypto Market Crash in Q4
While the bullish phases in 2025 were driven by optimism around the positive changes in the crypto market landscape, macroeconomic factors kept the market tethered to the downside.
Macro factors dominated the crypto news headlines in Q4. The U.S was cutting rates, but uncertainty prevailed due to pesky inflation and rising unemployment. Outside the U.S, the BOJ was preparing to make rate hike announcements that threatened to trigger an even bigger Yen carry trade unwind.
Many analysts warned that the Japanese bond market condition and the Yen carry trade situation were a systemic threat to the global financial markets. Thus, investors priced in those concerns by exiting their positions. This may explain why investors were not as eager to ape back into the market.
Note that the second crypto market crash happened while the super cycle theory remained dominant. The theory posited that the market would continue to rally and that the 4-year cycle was over. However, the market’s outcome reflected what would have happened if the 4-year cycle was still active.