According to Santiment, cryptocurrency retail traders quickly blamed the broader cryptocurrency market decline on U.S. President Donald Trump's announcement of a 100% tariff on China, as they often look for scapegoats during market downturns.
However, analysts stated that the reasons for the market crash run deeper than just tariffs.
"This is typical 'rationalization' behavior from retail traders, who need to point to a single event as the cause of the catastrophic drop in cryptocurrency," Santiment said in a report on Saturday.
"After the crash, the group quickly reached a consensus on what the washout could be attributed to," Santiment noted, referring to the increased social media discussions related to the cryptocurrency market and U.S.-China tariff concerns.
While geopolitical events acted as a catalyst for the market decline, analysts from The Kobeissi Letter indicated that this was not the only factor, also pointing to "excessive leverage and risk" in the cryptocurrency market. Analysts observed a severe bullish bias, with approximately $16.7 billion in long positions being liquidated, compared to only $2.5 billion in short positions, a ratio close to 7 to 1.
This significant liquidation event occurred as Bitcoin (BTC) fell more than 10% within 24 hours, with BTC/USDT futures on Binance hitting a low of $102,000 after Trump's tariff announcement.
Santiment stated that developments between the U.S. and China will "become" central to shaping retail cryptocurrency investors' trading decisions at least in the short term.
Santiment added that if negotiations between Trump and China improve and bring "positive news," retail sentiment towards cryptocurrency may improve.
However, if tensions escalate, traders should prepare for more pessimistic price predictions. "The gates for the prediction of 'Bitcoin falling below $100,000' are expected to start opening," Santiment said, adding:
After the cryptocurrency market decline, sentiment plummeted, with the cryptocurrency fear and greed index, which measures overall cryptocurrency market sentiment, dropping to a "fear" level of 27 in Saturday's update.
This is a sharp decline of 37 points from Friday's "greed" reading of 64, marking the lowest level in nearly six months.
Related: Trump's tariff threat triggers panic, cryptocurrency sentiment index falls to six-month low
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