Santiment said retail crypto traders were quick to blame Friday’s decline in the overall crypto market on U.S. President Donald Trump’s announcement of 100% tariffs on China, as they often look for blame during declines.
But analysts say the reasons for the market slump go deeper than just tariffs.
“This is a typical ‘rationalization’ move by retailers, and it is necessary to point to a singular event as the reason for the catastrophic downturn in cryptocurrencies,” Santiment said in a report on Saturday.
“After the crash, crowds jumped right in and tried to collectively come to a consensus on what was causing the flash,” Santiment said, referring to the increase in social media discussions related to both the crypto market and U.S.-China tariff concerns.
US and China developments will be crucial for retail traders
Analysts at Covisi Letter said that while geopolitical events were the catalyst for the market decline, they were not the only factor, as they also pointed to “excessive leverage and risk” in the crypto market. Analysts said there was a strong long bias, with about $16.7 billion of long positions liquidated compared to just $2.5 billion of short positions, a ratio of nearly 7 to 1.
This significant liquidation event came as Bitcoin (BTC) fell more than 10% in less than 24 hours following President Trump’s tariff announcement, with Binance’s BTC/USDT futures pair dropping to $102,000.
Santiment said that, at least in the short term, developments between the US and China will be “central” in shaping crypto retail investors’ trading decisions.
Bitcoin could fall below $100,000 forecast
Santiment added that if the Trump-Xi meeting improves and leads to “positive news,” retail sentiment towards cryptocurrencies is also likely to improve.
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However, if tensions rise, traders should be prepared for more pessimistic price forecasts. “Expect the floodgates to start opening for the ‘Bitcoin below 100,000’ prediction,” Santiment said, adding:
“Whether we like it or not, Bitcoin is behaving more like a risk asset than a safe asset in times of national tension.”
Sentiment plummeted following the crypto market decline, with the Crypto Fear & Greed Index, which measures sentiment across the crypto market, dropping to a “fear” level of 27 in Saturday’s update.
This represents a significant drop of 37 points from Friday’s “greedy” reading of 64 (the lowest level in nearly six months).
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