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The cryptocurrency market has experienced a significant decline over the past few days following Donald Trump's announcement of a 100% tariff on Chinese imports. Many retail investors blamed the tariffs for the market’s steep fall, according to data platform Santiment. The firm said traders often look for a single event to explain significant downturns.
Discussions about the US-China trade situation surged across crypto communities following the price drop. Bitcoin fell more than 10% within a single day, with Binance futures briefly touching $102,000. Santiment described this as a “rationalization” pattern, where retail traders quickly agree on one cause for a market crash.
However, analysts argued that tariffs were not the only factor at play. They pointed to internal weaknesses within the crypto market, such as high leverage and risk exposure. These underlying issues magnified the effects of the news event.
The Kobeissi Letter reported that excessive leverage worsened the sell-off. Around $16.7 billion in long positions were liquidated, compared to only $2.5 billion in short positions. This nearly 7-to-1 ratio showed a strong long bias that intensified losses.
Analysts said the market’s structure made it vulnerable to a large correction. When Bitcoin’s price began to fall, automated liquidations created further downward pressure. While Trump’s announcement may have initiated the decline, these internal factors exacerbated it.
Future developments in US-China relations will remain crucial to the crypto market's sentiment. Improved diplomatic talks could boost confidence. Rising tensions, however, may bring renewed pessimism and predictions that Bitcoin will fall below $100,000.
Market sentiment weakened quickly after the drop. The Crypto Fear & Greed Index fell from a “Greed” level of 64 to “Fear” at 35 on Saturday. By Sunday, it dropped further to 31, its lowest level in months.
Some traders view the recent crash as a healthy reset. Crypto investor Alex Becker said the correction could mark the start of a new bull market. He called the event a “massive overreaction” that cleared excessive leverage from the system.
Becker said investors had grown impatient as Bitcoin outperformed other cryptocurrencies. This frustration led to emotional trading and volatility. He argued that after this reset, the market could recover in a more stable way.
Analyst Benjamin Cowen also expects Bitcoin to rise again soon. Economist Timothy Peterson predicts a short cooling period before the next rally begins.
At press time, Bitcoin traded near $110,000, down 10% over the week. Experts agree that while the sell-off hurt sentiment, it may lay the groundwork for the next phase of the crypto cycle.
