Retail crypto traders quickly attributed Friday’s overall market drop to US President Donald Trump’s announcement of a 100% tariff on China, often looking for a scapegoat during downturns, according to Santiment.
However, analysts suggest that the cause of the market decline is more complex than just the tariffs.
“This reflects typical ‘rationalization’ behavior from retailers, who seek a single event to blame for significant downturns in crypto,” Santiment stated in a report on Saturday.
“Following the crash, the crowd swiftly reached a consensus on what could be causing the downturn,” Santiment remarked, highlighting the uptick in social media dialogues surrounding both the crypto market and US-China trade issues.
Developments between the US and China will be crucial for retail traders
While the geopolitical event triggered the market decline, analysts from The Kobeissi Letter identified additional factors, including “excessive leverage and risk” in the crypto space. They pointed out the heavy long bias, with approximately $16.7 billion in long positions liquidated compared to just $2.5 billion in shorts, creating a nearly 7-to-1 ratio.
The considerable liquidation event occurred as Bitcoin (BTC) dropped over 10% in just 24 hours, with the BTC/USDT futures pair on Binance hitting a low of $102,000 after Trump’s tariff announcement.
Santiment noted that developments between the US and China will be “central” to shaping crypto retail investors’ trading choices, at least in the near term.
Predictions of Bitcoin falling below $100,000 may arise
Santiment suggested that if negotiations 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
Conversely, if tensions heighten, traders should prepare for more pessimistic price forecasts. “We expect the ‘Bitcoin sub-100K’ predictions to start pouring in,” Santiment remarked, adding:
“Bitcoin, whether we want to admit it or not, is acting more like a risk asset than a safe haven in times of geopolitical tensions.”
Sentiment waned significantly following the crypto market decline, with the Crypto Fear & Greed Index, which gauges overall crypto market sentiment, dropping to a “Fear” level of 27 in Saturday’s update.
This marks a sharp 37-point decrease from Friday’s “Greed” reading of 64, the lowest level in nearly six months.
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