Bitcoin’s recent crash in October 2025 was a complex event influenced by multiple factors, and one important aspect to consider is whether it was related to macro hedge fund rebalancing. To understand this, it is necessary to explore the broader market context, the specific triggers of the crash, and the role hedge funds play in crypto markets.
The immediate catalyst for the crash was a geopolitical shock: a tweet from U.S. President Donald Trump on October 10, 2025, threatening a 100% tariff on all Chinese imports and new export controls on critical software. This announcement reignited fears of an escalating U.S.-China trade war, which sent shockwaves through global financial markets. Unlike traditional markets that were closed for the weekend, the crypto market operates 24/7, so it absorbed the initial panic immediately. Bitcoin plunged more than 14% within hours, falling from over $126,000 to around $104,782, while Ethereum and many altcoins suffered even steeper losses[1].
This crash was not a simple sell-off driven by retail investors but rather a mechanical, forced deleveraging event. Over $19 billion in leveraged positions were liquidated in a very short time, creating a vicious cycle where thin liquidity and evaporating market maker quotes caused prices to drop sharply, triggering more liquidations and further price declines[1]. This cascade effect is typical in highly leveraged markets and can be exacerbated by the behavior of large institutional players, including hedge funds.
Hedge funds, especially macro hedge funds, often engage in portfolio rebalancing based on shifts in macroeconomic conditions, risk appetite, and market signals. Macro hedge funds typically invest across asset classes, including equities, bonds, commodities, currencies, and increasingly, cryptocurrencies. When faced with heightened geopolitical risks or changes in monetary policy, these funds may reduce exposure to riskier assets like Bitcoin to preserve capital or meet liquidity needs elsewhere.
In the context of the October 2025 crash, the geopolitical tensions and the resulting market uncertainty likely prompted macro hedge funds to rebalance their portfolios. This rebalancing could involve selling Bitcoin and other cryptocurrencies to reduce risk or raise cash for other strategic moves. Such large-scale selling by hedge funds can amplify price declines, especially in a market already stressed by forced liquidations and thin liquidity[1][2].
Additionally, Federal Reserve comments and broader market sentiment about tightening monetary policy have historically influenced Bitcoin prices. When the Fed signals higher interest rates or reduced liquidity, risk assets like Bitcoin often suffer as investors seek safer or more liquid investments. This macroeconomic backdrop can trigger hedge funds to adjust their crypto holdings accordingly, contributing to price volatility[2].
It is important to note that while macro hedge fund rebalancing is a plausible and significant factor, it is not the sole cause of Bitcoin’s crash. The event was a confluence of geopolitical shocks, forced deleveraging in leveraged crypto positions, thin liquidity conditions during weekend trading hours, and broader macroeconomic concerns. The interplay of these factors created a perfect storm that led to one of the largest single-day wipeouts in crypto history[1].
In summary, Bitcoin’s crash in October 2025 was related to macro hedge fund rebalancing in the sense that these funds likely adjusted their portfolios in response to geopolitical risks and changing market conditions. This rebalancing, combined with forced liquidations and liquidity evaporation, contributed to the sharp price decline. Understanding this dynamic highlights how interconnected crypto markets have become with traditional financial markets and macroeconomic events.