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 Today
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 purchases—contracts that pay off if volatility spikes, which typically happens during a stock market downturn or crash.
Cboe VIX Index has jumped to its highest level since December. Source: GoogleFinance
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 SP 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 yesterday’s gains from Trump’s 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.
Trump’s 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 Trump’s escalating trade war and federal workforce cuts fueling fears that inflation could impact the Federal Reserve’s interest rate decisions.
Additionally, as U.S. tariffs on foreign trade partners take effect today, at least two countries—Canada and China—have 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, Mexico’s 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 SP 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, markets—both traditional and digital—are bracing for a turbulent ride.
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