Cryptocurrency retail traders were quick to blame the broader decline in the cryptocurrency market on Friday on US President Donald Trump’s announcement of a 100% tariff on China, as they are often looking for something to point the finger at during recessions, according to Santiment.
However, analysts say the reason for the market decline is deeper than tariffs alone.
“This is typical ‘rationalizing’ behavior from retail traders, who need to point to a single event as the cause of a catastrophic downturn in the crypto space,” Santiment said. He said In a report on Saturday.
“After the crash, the crowd jumped in quickly to collectively reach a consensus on what the influx could be attributed to,” Santiment said, referring to the increase in social media discussions related to both the cryptocurrency market and tariff concerns between the US and China.
Developments in the US and China will be vital for retailers
Although the geopolitical event was a catalyst for the market decline, it was not the only factor, according to analysts from The Kobeissi Letter, who also pointed to “excessive leverage and risk” in the cryptocurrency market. Analysts noted its long bias, with about $16.7 billion of long positions liquidated versus just $2.5 billion of short positions, a ratio of roughly 7 to 1.
The significant liquidation event came with Bitcoin (BTC) falling more than 10% in 24 hours, with the BTC/USDT futures pair on Binance falling to a low of $102,000 following Trump’s tariff announcement.
Santiment said developments between the US and China will be “pivotal” in shaping the trading decisions of retail crypto investors, at least in the short term.
Bitcoin may fall below $100,000 forecast
Santiment added that if talks between Trump and Xi improve and lead to “positive news,” retail sentiment toward cryptocurrencies is likely to improve.
Related to: Analyst: Market collapse “has no long-term fundamental effects.”
However, if tensions escalate, traders should prepare for more pessimistic price forecasts. “Expect the ‘Bitcoin sub-100k’ prediction floodgates to start opening,” Santiment said, adding:
“Whether we like it or not, Bitcoin behaves more like a risky asset than a safe haven during times of tension in the country.”
Sentiment declined following a decline in the cryptocurrency market, with fear and greed emerging in cryptocurrencies indexwhich measures overall cryptocurrency market sentiment, fell to a “fear” level of 27 in an update on Saturday.
That represents a sharp decline of 37 points from Friday’s “greed” reading of 64 points, the lowest level in nearly six months.
magazine: The EU’s privacy-killing chat control bill has been delayed – but the fight is far from over
The post Crypto Traders Show ‘Rationalization’ Behavior’ After Market Plunge first appeared on Investorempires.com.
