Wednesday was another wild day on Wall Street.

This almost sounds like it could be the setup for an extremely niche markets joke.

Several exchange-traded products that track swings in a popular Wall Street volatility gauge were themselves halted for volatility on Wednesday afternoon after President Trump announced a 90-day pause on some tariffs.

The halts came as the Cboe Volatility Index VIX, better known as the VIX or Wall Street's "fear gauge," tallied its biggest daily drop on record, according to Dow Jones Market Data.

The iPath Series B S&P 500 VIX Short-Term Futures ETN VXX was halted for about 10 minutes at around 1:35 Eastern time as the VIX tumbled, eliciting a more than 20% drop in the ETN. By the time the market closed, VXX was down more than 21% at $66.77, FactSet data showed.

The VIX itself fell by nearly 36% on Wednesday to 33.37, FactSet data showed. The index measures demand for out-of-the-money options contracts tied to the S&P 500. Activity in contracts set to expire over the next month or so is seen as a proxy for how anxious investors are about the market. Options are often used to protect portfolios from losses.

Other VIX-linked funds were also halted. The ProShares Ultra VIX Short-Term Futures ETF, which allows investors to turbocharge bets that the VIX will climb, fell by more than 31% on Wednesday to finish at $32.61 after trading reopened.

Its sibling, the ProShares VIX Short-Term Futures ETF, fell 20.9% to $65.50.

At the same time, funds that allowed investors to bet against the VIX soared as the index receded, which also led to at least one trading halt. The ProShares Short VIX Short-Term Futures ETF SVXY rose 10.7% on Wednesday to finish at $37.79.

The VIX's collapse came after the fear gauge hit its highest closing level since 2020 on Tuesday. The drop in the volatility gauge coincided with a 9.5% jump in the S&P 500, which finished Wednesday at 5,456.90.

The selloff in VIX-linked funds came after these products saw sharp inflows earlier in the week, with some seeing their biggest hauls in years on Tuesday.

That the VIX fell isn't all that surprising. According to JJ Kinahan, chief executive of IG North America, the parent of brokerage Tastytrade, demand for portfolio hedges dried up following Trump's announcement.

"People felt such immense need for protection because of the unknown," Kinahan told MarketWatch. "At least we have a known for the next few months, and people can plan accordingly," he said, referring to Trump's tariff plans.

Funds like SVXY that allowed traders to bet against the VIX made headlines back in February 2018 when a strategy known as the short-volatility trade blew up in spectacular fashion, ushering a broader market panic remembered on Wall Street as "Volmageddon."

In the months that preceded the blowup, volatility had languished, enticing many individual investors to pour money into these short-volatility products.

On Feb. 5, 2018, the VIX doubled in a single day, which caused the implosion of the VelocityShares Daily Inverse VIX Short Term ETN and unleashed a wave of volatility that rattled stocks. The meltdown in these products saddled investors with billions of dollars in losses.