Crypto retail traders quickly attributed Friday’s broader crypto market drop to US President Donald Trump’s announcement of a 100% tariff on China, as they often seek a scapegoat during downturns, according to Santiment.
However, analysts argue that the reasons behind the market decline run deeper than just the tariffs.
“This is typical ‘rationalization’ behavior from retailers, who need to point to a singular event as the cause of a significant downturn in crypto,” Santiment stated in a report on Saturday.
“Following the crash, the crowd swiftly came to a consensus about what triggered the decline,” Santiment noted, referring to the uptick in social media discourse connected to both the crypto market and US-China tariff concerns.
US and China developments will be crucial for retail traders
While the geopolitical event fueled the market decline, it was not the sole factor, analysts from The Kobeissi Letter observed, also highlighting “excessive leverage and risk” within the crypto market. They reported a pronounced long bias, with about $16.7 billion in long positions liquidated compared to just $2.5 billion in shorts, reflecting a nearly 7-to-1 ratio.
The significant liquidation event occurred as Bitcoin (BTC) dropped over 10% in just 24 hours, with the BTC/USDT futures pair on Binance plunging to a low of $102,000 following Trump’s tariff announcement.
Santiment stated that developments between the US and China will “be central” in shaping the trading decisions of crypto retail investors, at least in the short term.
Predictions of Bitcoin falling below $100,000 may arise
Santiment indicated that if discussions between Trump and Xi improve and yield “positive news,” retail sentiment towards crypto is likely to improve.
Related: Market crash ‘does not have long-term fundamental implications’ — Analyst
However, if tensions rise, traders should prepare for more negative price predictions. “Expect the ‘Bitcoin sub-100K’ prediction floodgates to swing open,” Santiment remarked, further adding:
“Bitcoin, whether we accept it or not, is behaving more like a risk asset than a safe haven during times of geopolitical tensions.”
Sentiment plummeted following the crypto market decline, as the Crypto Fear & Greed Index, which gauges overall crypto market sentiment, fell to a “Fear” level of 27 in Saturday’s update.
This marks a steep 37-point decrease from Friday’s “Greed” rating of 64, its lowest point in nearly six months.
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