Tuesday, June 23, 2026 at 11:00 AM
Original source
NY Fed — Liberty Street Economics
MacroLab briefing generated by AI for informational purposes. Original reporting by NY Fed — Liberty Street Economics. Not financial advice.
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On October 10, 2025, the federal government announced it might impose a 100 percent tariff (a tax on imports) on goods from China. This announcement spooked financial markets. Investors suddenly wanted to sell risky assets and move their money to safer places. Prices of cryptocurrencies like Bitcoin and Ethereum dropped sharply. At the same time, stablecoins (digital currencies designed to hold a fixed value, usually tied to the U.S. dollar) experienced stress. Trading volume spiked as panicked investors tried to buy and sell quickly, but there weren't enough buyers and sellers at normal prices, meaning liquidity (the ease of converting assets to cash) dried up on major crypto exchanges.
When crypto and stablecoin markets seize up, it creates ripple effects for ordinary people and the broader economy. If you own cryptocurrency or use stablecoins for any reason (some people use them to move money quickly or cheaply), you suddenly can't easily sell or move your money without taking a big loss. More broadly, the incident shows how interconnected modern financial markets are. A shock in the crypto world can spread to traditional finance, affecting confidence in the financial system itself. If stablecoins lose trust and fail, people who depend on them lose access to their funds, and the instability can spill over to banks and ordinary borrowing and lending.
Watch whether stablecoin prices actually break their peg (their promised fixed value against the dollar). If major stablecoins start trading at 95 cents or 90 cents instead of $1, that signals serious trouble. Also watch whether crypto exchanges fail or restrict withdrawals, which would mean people can't access their own money. Finally, monitor whether this crypto stress spreads to traditional banking or credit markets. If major banks or money market funds (which ordinary people and businesses use to park cash safely) start showing problems, the crisis has jumped out of crypto and into everyday finance.