Something strange happened in crypto-land this weekend. On Friday afternoon at around 4:30 pm, a large “whale” — a player big enough to noticeably move asset prices — began placing shorts on crypto. Short orders occur when traders borrow an asset, which they immediately sell, before buying it back at (they hope) a reduced price, repaying the loan and then pocketing the difference.

Minutes later, President Donald Trump announced a 100% tariff on Chinese imports. The price of Bitcoin then plunged by 4%, whereupon most of the short positions were closed. Whoever was doing the trading walked away with a profit of $192 million. Nice work if you can get it.

Of course, everyone else in the crypto space lost around $200 billion among them. The immediate suspicion was that someone in the administration knew what was coming and decided to make a fast buck.

It’s not the first time strange movements have taken place in markets just before a major Trump announcement that moved asset prices. In April, the Attorney General Pam Bondi sold millions of dollars worth of stock in Trump Media just hours before the President’s “Liberation Day” tariff announcement sent its price tumbling. A week later, Trump’s tweet urging that it was a “great time to buy,” just before his U-turn on tariffs, raised further suspicion. ProPublica has documented several similar cases where market swings coincided suspiciously with presidential statements.

Trump denies any insider dealing while acknowledging, albeit doubting, that administration insiders could be profiting from privileged information. And it would be very difficult to prove that anyone broke the law. In any case, there’s more to the story than an engineered crash: cryptocurrency prices were already sliding before Trump’s announcement, which merely accelerated the fall — if only briefly.

The crypto market is highly leveraged, with traders taking on debt to buy digital assets on the assumption that rising prices will make repayment easy. But when prices turn, some owners are forced to sell quickly to meet their debt obligations. That appears to have exacerbated Friday’s plunge.

Although Bitcoin was originally created to democratise finance, almost the entire stock of the world’s most popular cryptocurrency is today held by 2% of its owners — a few dozen alone hold nearly a fifth of it. Some of these whales are funds or “Bitcoin treasuries” like Strategy (formerly MicroStrategy), which exist just to buy Bitcoin and profit from its price rises. Some of these, in turn, carry a lot of leverage. Strategy, for instance, which owns Bitcoin worth some $80 billion, is carrying over $11 billion in debt on its books.

The company is clearly in the black and in no rush to pay its debts, since it’s mostly long-dated. But if the price of Bitcoin keeps falling, Micro will struggle to raise more debt to jack Bitcoin’s price back up. Therein may lie the problem. If cryptocurrencies have been boosted by debt, and the credit dries up, all it will take is for one or two of these whales to cash out and the whole house will fall down.

Crypto-enthusiasts doubt that will happen. They say that Friday’s sell-off squeezed the excess from the market, which is now poised to resume rising. Maybe. But over the weekend, Bitcoin fell further. There may be a few more chapters to this story.

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John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).

jarapley

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