On January 12, President Donald Trump declared via Truth Social that the United States would impose 25% tariffs on all countries doing business with Iran, “effective immediately.”
Bitcoin (BTC) briefly dipped below $91,000, but rose above $92,000 within hours. The liquidation cascade never materialized. There is no systematic mitigation. The market absorbed the maximalist-like geopolitical headlines and moved on.
At the time of writing, BTC was trading around $94,000, up 1.5% in the past 24 hours.
A similar announcement came three months earlier when President Trump threatened to impose 100% tariffs on China in October 2025, causing over $19 billion in forced liquidations and sending Bitcoin down over 14% in a matter of days.
This contrast raises a simple question. Why did one tariff headline burst onto the market while the other barely registered?
The answer is not that traders are numb to President Trump’s comments. That is, the market currently evaluates the price of policy announcements through a filter of credibility. Specifically, the gap between social media posts and enforceable policies.
January 12th scored low on both reliability and immediacy, and October 10th scored high on both, arriving in a market primed to explode.
reliability gap
The White House did not post a corresponding executive order at the same time as President Trump’s “Truth Social” announcement. No Federal Register notice was published. There is no Customs and Border Protection guidance defining what “transactions with Iran” actually means or which transactions are subject to the 25% tax.
The report notes that no formal documentation exists and that the legal basis is unclear.
The absence is significant because the Supreme Court is currently considering whether President Trump exceeded his authority to impose tariffs using the International Emergency Economic Powers Act (IEEPA).
Lower courts had already ruled that IEEPA tariffs were excessive, and those decisions were stayed pending the high court’s decision.
Polymarket odds give the Supreme Court only a 27% chance of upholding the tariff decision, while Calci’s odds are slightly higher at 31.9%.
Traders were already discounting tariff powers before Iran’s announcement was released. In the absence of clear enforcement mechanisms or legal certainty, markets treated this headline as conditional guidance rather than immediate policy.
This is reliability discounting in action. The threat of tariffs may sound extensive on paper, but trade it like an option until the paperwork and enforcement timelines are clear.
Why was October broken and January bent?
October 10th was more than just a headline. This was a credible macro shock that hit a structurally weak market. President Trump’s announcement of 100% tariffs targeting China was accompanied by a clear geographic scope, an explicit trade war framework, and immediate asset-to-asset repricing.
Escalation between the United States and China is recognized globally as a risk trigger. In contrast, Iran-related trade restrictions operate in a more ambiguous policy space, where existing sanctions already restrict trade flows.
Even more important was what was written under the heading. In early October, open interest in perpetual futures rose to near-record levels, funding rates became persistently positive, and leveraged positions were concentrated in a narrow range.
Once news of the tariffs broke, they were forced to liquidate as well as reprice their risks. Bitcoin fell to $104,782 but stabilized after more than $19 billion in liquidations. That wave of liquidations was a mechanical unwinding caused by forced sales and evaporation of liquidity, rather than new information about the fundamentals of cryptocurrencies.
In contrast, the setup on January 12 looked different. According to CoinGlass data, the current open interest stands at approximately $62 billion. While this is a high number, it is well below the $90 billion seen before the October 10 washout.
Additionally, funding rates have been hovering in a modest range of 0.0003-0.0008% per 8-hour period, well below the congested long-term threshold that amplifies drawdowns.
Deribit recently noted that seven-day at-the-money implied volatility has spiked by about 10 volume points, consistent with traders buying hedges and re-pricing tail risk. Still, the spot was held.
Bitcoin ETFs recorded net inflows of approximately $150 million in January, according to data from Pharcyde Investors. This suggests that institutional flows are offsetting headline-driven selling pressure, albeit by a small margin.
The result was a dip-and-recovery pattern rather than a cascade. Markets that hedge more quickly and maintain deeper liquidity do not transmit geopolitical noise to systemic breaks.
October’s liquidation spiral required both a reliable shock and a market structure ready to amplify it. In January, we had neither.
Iran’s trade performance and actual transmission channels
If the threat of tariffs were to be immediately enforceable, it would be a problem not for Iran itself but for China.
China is by far Iran’s largest trading partner. According to Reuters, China will import $22 billion of Iranian products in 2022, more than half of which was oil.
In 2025, China will purchase more than 80% of Iran’s exported crude oil, averaging about 1.38 million barrels per day, equivalent to about 13.4% of China’s seaborne imports.
In other words, any serious attempt to punish “countries that do business with Iran” would essentially be about China, and Brazil would also be at risk through its agricultural exports to Iran.
Part of the reason the market discounts announcements is the complexity of execution. There is no clear targeting mechanism, no obvious way to isolate Iran-related transactions without disrupting broader trade flows, and no precedent for how such a regime would work in practice.
An important transmission route is oil. Brent crude oil is trading around $64 a barrel and West Texas Intermediate is trading around $59.70, with analysts estimating a geopolitical risk premium related to tensions over Iran at $3 to $4 a barrel.
If this premium persists and causes sustained upward pressure on inflation expectations, the real damage to cryptocurrencies will come through interest rate channels such as higher oil prices, higher inflation expectations, higher real yields, and lower risk assets.
The vulnerability of cryptocurrencies to geopolitics is not direct, but occurs indirectly through macro-repricing.
A framework for pricing policy noise
The pattern that emerges when comparing January 12th and October 10th is straightforward. Policy headlines move markets when they combine credibility, immediacy, and vulnerable positioning.
Decompose the reaction function into components.
| size | important questions | Evidence checklist (what to verify) | Market/Quant Proxy (What to Measure) | Score guide (0-5) | If your score is high, you can expect… |
|---|---|---|---|---|---|
| reliability | Is this it? real policy Or is it just rhetoric? | signed executive order Has it been published? Federal Register News? Agency information (e.g. CBP) issued? clear legal authority Is it cited (and legally durable)? | “Document exists” (yes/no). Headline → Time until formal action. Legal clarity (court situation/prediction market odds) | 0: Social posts only. No documentation or permissions. 3: Partial documents or reliable leaks, authority disputed. 5: Sign + Publish + Agency Implementation + Clear Authorization | reprice it stick (Not just a core). Volume bidding continues |
| immediacy | Could this impact flow/cashflow? Immediately? | Enforcement date Designated? Identifiable trading partner What’s your name? Target transaction Is it clearly defined? | Number of days until enforcement. The breadth of the range. Compliance Feasibility. Cross-asset reaction speed | 0: No date/range. 3: The date or scope is present but still ambiguous. 5: Date + Range + Counterparty + Execution Mechanism | Faster and cleaner risk response. Buying on the spur of the moment is reduced |
| Exploit vulnerabilities | Depending on the structure the heading will look like this forced sale? | Is the market with a lot of OI? Is funding continuously positive? Are liquidation levels concentrated near the spot? Is the IV regime complacent or already stressed? | OI / market capitalization;Funding (8 hours) level and persistence. Liquidation heatmap/cluster. IV level + term structure (7D vs. 30D) | 0: Low OI ratio, negative/flat funding, diversified risks, IV is already high. 3: It’s high, but not extreme. 5: Extreme OI ratio + hot financing + tight Liq cluster + low volume satisfaction | The probability of cascading is higher. Large scale liquidation print. fluid air pocket |
October 10th received a high score for credibility due to its clear targeting of China and rhetoric of escalating trade wars. It also received high scores for immediacy to direct tariff threats due to broad market interpretation, record open interest, crowded positioning, and extreme leverage vulnerability due to low hedging.
Meanwhile, the January 12 report received a low score for credibility due to a lack of official documentation. It also ranked low in terms of immediacy and moderate in terms of leverage due to uncertainty in the scope and timing of execution. It’s up but not extreme, as we’re seeing active hedging in the volume market.
The market’s muted reaction to January 12th was not due to irrational emotions or insensitivity. This was a reasonable repricing from an enforcement and positioning perspective.
Something that could flip the script
The current basic scenario is that the threat of Iran tariffs remains an unstoppable headline. This is an option for traders to monitor, but not to actively price until an implementation mechanism emerges.
However, several scenarios can change that calculation.
A formal executive order with a clear enforcement scope, naming specific sectors and trading partners, and setting a final start date will greatly increase both credibility and immediacy.
Markets will need to reassess the tail risk that broad Iran-related tariffs do occur, immediately complicating oil flows and diplomatic relations with China.
If the Supreme Court upholds President Trump’s emergency tariff authority under IEEPA, future tariff announcements would regain credibility even without complete documentation. Conversely, if the courts strike down the system, the threat of tariffs would lose its structural impact, but short-term volatility around refund obligations could cause confusion among assets.
If the geopolitical risk premium for oil persists and inflation expectations rise enough to push real yields higher, cryptocurrencies will face declines through the interest rate channel, regardless of whether Iran tariffs materialize.
The leverage and liquidity dynamics that disrupted markets in October could quickly restructure if positioning becomes crowded again and funding rates return to rising territory.
What cryptocurrencies have learned
The lesson of January 12th is not that cryptocurrencies are immune to geopolitical risks. That is, cryptocurrencies are now immune to unenforceable geopolitics, at least until leverage is restored.
Markets that price policy through confidence filters, hedge aggressively, and maintain depth can absorb headline volatility without it cascading. You can’t do it in a market that doesn’t have that.
President Trump’s threat of Iran tariffs landed on an adapted structure. Traders bought volatility instead of selling the spot. Open interest continued to rise, but not by much. Institutional flows offset retail anxiety. The result was a decline that recovered within hours rather than a wave of liquidations that worsened over days.
Fragility has not disappeared. It’s conditional. If confidence increases, immediacy increases, and leverage rebuilds to October’s extreme levels, the next tariff headline or the next macro shock could trigger the same chain reaction.
Until then, cryptocurrencies will continue to treat maximalist announcements as negotiating positions rather than viable policies. The Supreme Court will decide whether the discount is justified.
