Bitcoin, altcoins tumble as China strikes back with rare earth restrictions

The global cryptocurrency market has suffered another sharp downturn after China’s move to tighten export controls on rare earth materials in retaliation for the new US tariffs imposed by President Donald Trump on Friday.

Beijing’s announcement came shortly after Trump revealed sweeping 100% tariffs on all Chinese imports, a move that many analysts view as the most severe escalation in trade tensions since 2019.

Within hours of China’s response, the crypto market shed nearly $7 billion in value, reigniting fears of a broader sell-off as the war between the world’s two largest economies escalates.

China’s retaliation amid rising trade tensions

China’s Ministry of Commerce has announced new restrictions on the export of rare earth magnets, expanding existing controls to five additional elements, including holmium and erbium.

Any product containing more than 0.1% of these materials now requires export approval.

Officials framed the move as a “legitimate action” to safeguard national security and refine export management systems, while US officials denounced it as economic retaliation.

The timing was strategic. China dominates more than 90% of the world’s rare earth processing capacity, giving it leverage in industries vital to global manufacturing.

From electric vehicles and wind turbines to defence systems and semiconductors, rare earths are indispensable to modern technology.

September data already showed Chinese rare earth exports plunging 31%, signalling tightening supply even before the new rules took effect.

Market turmoil follows rare earth squeeze

The impact was immediate across financial markets. Wall Street slid sharply, with tech-heavy indexes losing over 2%.

Safe-haven assets have rallied as investors flee to security. Gold, for instance, has surged to a record $4,200 per ounce, and silver has hit $51.70.

In crypto markets, about $121.6 billion has been wiped out after the total market capitalisation slid 3.2% to $3.76 trillion, with over $500 million in leveraged positions liquidated within hours.

Source: CoinMarketCap

Bitcoin (BTC) has plunged 3.11% to around $111,054, while Ethereum (ETH) has more than 4%, to trade at around $3,942.

XRP and Dogecoin (DOGE) have also suffered steep blows, with XRP dropping by over 6% and Dogecoin dropping by over 5%.

Crypto market’s exposure to China’s industrial power

The rare earth clampdown has also sent ripples through the crypto mining sector.

Rare earths are crucial for manufacturing GPUs and ASIC chips, the hardware that powers mining rigs.

Analysts warn that prolonged export reviews and potential supply chain delays could raise hardware costs and slow network hash rates in the short term.

Uncertain path ahead for markets

While Trump initially vowed to “fight extraordinary Chinese aggression,” he appeared to soften his stance over the weekend, calling Chinese President Xi Jinping “highly respected” and suggesting that “it will all be fine.”

Beijing, however, maintained a hard line, warning that the US could not “seek dialogue while threatening new restrictive measures.”

Investors now turn their focus to the Federal Reserve, where Chair Jerome Powell is expected to speak at the NABE Annual Meeting in Philadelphia.

Any hint of hawkishness from the Fed could deepen the current risk-off sentiment, while signs of easing could stabilise markets.

For now, the rare earth shock has underscored how vulnerable digital assets remain to geopolitical crosswinds.

Despite the weekend rebound in some altcoins, the broader market remains fragile, with traders watching both Washington and Beijing for the next move in an increasingly high-stakes economic standoff.

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