The Biggest Liquidation Sale Ever  

It happened again... The latest in the U.S.-China trade fight... Trump: 'It will all be fine'... The market liked the backtracking... Crypto's biggest liquidation event ever... Stocks bounced... What to watch this week...

Speaking of 'orange swans'...

The ink wasn't dry on Dan Ferris's Friday Digest when the next "orange swan" emerged... and it was one of the biggest ones since April.

As Dan explained, an orange swan is a rare, unpredictable market event caused by President Donald Trump. They can be positive or negative. The "tariff tantrum" that tanked markets this spring was a negative one.

On Friday afternoon, Trump sent U.S. stocks plunging after his unexpected Truth Social post escalated trade relations with China – again. The benchmark S&P 500 Index lost nearly 3%, as Dan noted on Friday. The tech-heavy Nasdaq Composite Index was down about 3.5%.

Then it got worse.

After the U.S. stock market closed, Trump sparked a sell-off in cryptocurrencies (which trade 24/7) when he shared a more detailed post that threatened a 100% tariff on Chinese imports, "over and above any Tariff that they are currently paying."

Bitcoin, which had been trading near an all-time high above $120,000, fell nearly 15% in a few hours.

The reason for Trump's ire?

He accused China of "sending an extremely hostile letter to the World." Trump also suggested he won't meet with Chinese President Xi as planned in two weeks ahead of another formal round of trade talks scheduled for next month.

It's about rare earth minerals...

On Thursday, China's state council imposed tighter restrictions on exports of rare earth metals (which are essential for manufacturing a lot of goods, like semiconductor chips). China accounts for about 70% of the global supply of these minerals.

In its announcement, China said that foreign countries, businesses, or individuals would have to obtain a license from Beijing to export any products containing more than 0.1% of China-sourced or extracted rare earth metals – so basically anything and everything tech related.

In a press conference, a Chinese government spokesperson called out the use of these minerals in foreign "military operations," which are a threat to "China's national security and interests... and [have] undermined international non-proliferation efforts."

A day later – sandwiched around posts about brokering a hostage-exchange deal between Israel and Hamas to end the war in Gaza – Trump (or someone writing on his behalf) publicly responded to China.

"I will be forced... to financially counter their move," one of the social media posts read. "There is no way that China should be allowed to hold the World 'captive'" with its rare earths policy. Trump also said the move was "a real surprise" before threatening the 100% tariff.

Then came the backtracking...

China responded to Trump's Friday posts by accusing the U.S. of a "textbook double standard" of export controls for national security reasons and saying it is not afraid of a trade war.

By Sunday Trump appeared to back off Friday's tough posture... essentially saying "This is fine."

We haven't seen anything about China backing off from its new policy, so perhaps it's getting what it wants. And the White House is listening to the market again (like it did in April after Liberation Day).

Either way, it looks like investors think the "TACO" trade is viable again. After all, the key sentiment in the post above is that Trump doesn't want a depression for the U.S.

The markets rallied on today's open and reclaimed a lot of Friday's losses as buyers stepped in. The S&P 500 finished roughly 1.5% higher, and the Nasdaq closed up more than 2% today. Bitcoin traded above $115,000. Gold hit another new all-time high. (The bond market was closed today for Columbus Day, so no signal there.)

It all happened so quickly that you might not have even noticed if you didn't look at your portfolio after Thursday. That should be a lesson about navigating a volatile market. As the Stansberry's Investment Advisory lead editor, Whitney Tilson, wrote in his free daily letter today...

This is all just market "noise" that long-term investors should tune out.

Agreed. Of course, unless you unplug completely, it's impossible to completely ignore short-term noise like this. But you have a better chance of managing it and sleeping easier if you own a lot of high-quality stocks as the core of a well-diversified portfolio built to last.

That includes not being overleveraged in any one asset. I (Corey McLaughlin) just wrote about this concept last week, and we saw a historically large example of the pitfalls of being overleveraged this weekend...

The biggest 'liquidation sale' ever...

As our Crypto Capital editor Eric Wade wrote in an update to subscribers today, bitcoin – the world's most popular crypto – fell from about $122,000 to just less than $105,000 in a few hours on Friday, before recovering part of the loss.

The overall market cap of all cryptos dropped from $4.2 trillion on Friday morning to $3.8 trillion Saturday morning, a fall of $400 billion. The drop was big enough to trigger more than $19 billion in "liquidations as leverage unwound."

This happens when leveraged buyers don't have more funds or collateral to meet margin requirements, or calls, from the brokerage firms or exchanges that lent to them to make the trade. So their positions are automatically sold, or "liquidated," by the broker or exchange. If that happens enough, it can create a downward spiral on an asset's price.

That's what happened on Friday and Saturday, with the timing of a weekend marking "thin liquidity" with limited buyers for the forced sellers. In total, at least 1.6 million trading accounts reportedly got liquidated as exchanges automatically sold off their collateral.

It was the largest single-day "liquidation sale" in cryptocurrency history. The next highest was a nearly $10 billion event in April 2021 – with bitcoin then near an all-time high of around $60,000 – on rumors about anti-money-laundering actions and reports of crypto-mining disruptions in China.

That said, the spot bitcoin price did ultimately find a floor this weekend with buyers stepping in. The crypto is now about 10% higher than Friday's low. It's also still above its 200-day moving average, a simple technical measure of a long-term trend. As Eric explained...     

The sell-off wasn't about fundamentals. It was a leverage flush amplified by low weekend liquidity and stop losses. But with equity markets reopening today and China promising retaliatory measures, we could see more volatility as investors price in the headlines.

Just keep in mind... every prior crypto bull cycle has included dramatic sell-offs. They clean out excess, reset sentiment, and clear the path for the next leg higher.

We've always been clear: Crypto is a high-risk, high-volatility, high-reward market. These sudden drops are the price of admission for long-term gains. Many cryptos are already rebounding as fresh buyers step in.

As Eric says, the bull market in cryptos remains in place. Overleveraged and perhaps inexperienced traders were punished, but the core long-term story about "blockchain adoption, institutional inflows, and scarce digital assets hasn't changed."

In short, "this weekend was a stress test, not a crash."

Notably, this tariff-threat-triggered-liquidation event was more than 12 times larger in market cap than events during the FTX scandal in 2022 and the COVID-19 panic in 2020. Those happened in bear markets. This happened during a bull market that, today at least, proved resilient.

As for stocks...

On October 1, we told you about an important game plan update from Ten Stock Trader editor Greg Diamond. Greg warned readers about a technical setup for the S&P 500 Index that suggested a possible "correction" in October.

As the headline indexes churned higher, Greg urged subscribers to remain patient. And he wasn't getting bullish in his trading service, based on all the indicators he was seeing and his "time and price" approach. As Greg wrote today...

If you recall – or go back to some of the charts we looked at in September – we had October 3 to October 8, October 13, and then the last few days of October as important time factors to watch.

The early set of dates "clearly marked a high," Greg continued in an update this morning about a bearish trade on the Nasdaq that netted Ten Stock Trader subscribers around 19%. Now, Greg is being patient again to "see whether today (October 13) will mark a low."

He wrote in his trade instructions today...

From last Thursday to this morning, the major indexes went from overbought to oversold conditions.

While I can't rule out a bit more volatility, we may be looking at a very short correction within this uptrend and a buying opportunity on the horizon.

Based on Greg's analysis, the bull market in stocks may be set to continue as well – at least for now. Since we've seen a few of these volatile sell-off episodes before (and tariff backtracking throughout the year), the idea makes sense.

As we've noted recently, there were pockets of greedy froth in the market. They were due for a washout.

Meanwhile, the ingredients for a potential "Melt Up" over the longer run remain in place, and stocks aren't in dot-com bubble territory yet. Onward...

What to watch this week...

Earnings season is back... The big banks get things going in earnest with reports tomorrow. Wall Street consensus for year-over-year growth for the S&P 500 is 8%, with the semiconductor sector expected to be the largest contributor of that growth.

We're also on Day 13 of the partial government shutdown. Outside of being a furloughed employee yourself, or if you've tried to fly in or out of particular airports where air traffic controllers are short-staffed, you probably haven't felt the impact.

And it seems the investing world has gotten used to the data "blackout." That might be because the Federal Reserve is still open, with Fed Chair Jerome Powell making a public appearance tomorrow.

Also, the shuttered Bureau of Labor Statistics ("BLS") has brought back some staff to publish the September consumer price index ("CPI") report because the third-quarter data is needed for the annual Social Security cost-of-living adjustment on November 1.

The CPI report will come out next Friday morning instead of this week. The formal reason it will be released during a BLS shutdown is "to meet statutory deadlines necessary." In other words, it's because of a law that must be enforced.

It makes you wonder whether this shutdown might be making the government more efficient, while Elon Musk and the ballyhooed Department of Government Efficiency ("DOGE") couldn't. It's funny the way things go.

New 52-week highs (as of 10/10/25): Alpha Architect 1-3 Month Box Fund (BOXX), Cencora (COR), Lynas Rare Earths (LYSDY), Monster Beverage (MNST), Sprott Physical Silver Trust (PSLV), Roche (RHHBY), iShares Silver Trust (SLV), Uranium Energy (UEC), and Global X Uranium Fund (URA).

In today's mailbag, feedback on Dan Ferris' Friday essay, which in part discusses the "Melt Up"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Dan, I think I can help square Sjug's Melt Up concept with your difficulty connecting the laws of gravity to it. You are correct in the real world; gravity would draw equity prices downward. However, in a Melt Up, the investing world is upside down ("investors" (speculators) ignoring the laws of investing and wise decision-making), and in an upside-down world, gravity pulls equity prices higher, not lower, due to the Melt Up.

"Continue to sound the alarm as to what should happen in this market, a passion you've had for decades and for which I and many of my fellow readers have come to appreciate. I learned long ago to listen to you for big-picture concepts and ideas as to what should happen and loved it when you adopted the mantra 'prepare, don't predict' due to markets regularly making irrational decisions in the short term. Keep up the good work, and God bless." – Subscriber Scott P.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
October 13, 2025

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