Analysts warn that leverage and risk exposure, not just tariffs, fueled the $20B crypto liquidation crash
As the global crypto market reels from one of its sharpest declines this year, retail traders are pointing fingers at U.S. President Donald Trump’s 100% tariff announcement on Chinese imports, calling it the key trigger behind the $20 billion liquidation wave that shook markets Friday.
According to analytics platform Santiment, traders are showing “rationalization behavior,” seeking a single cause to explain what was in reality a broader market correction. “This is typical of retailers who need to point to a singular event for a cataclysmic downturn in crypto,” Santiment said in its latest market report.
The data shows a sharp surge in online discussions linking the U.S.-China trade escalation with the crypto sell-off. However, analysts caution that the real cause lies deeper — in excessive leverage and risk-taking across exchanges.
“The crypto market was overextended, with a 7-to-1 ratio of long to short positions,” analysts from The Kobeissi Letter noted. “Once liquidation began, it cascaded uncontrollably.”
Bitcoin plunged more than 10% within 24 hours, briefly dipping to $102,000 on major exchanges, while Ethereum and other altcoins followed with double-digit losses. At the time of writing, Bitcoin trades near $110,000, marking a 7-day drop of over 10%.
Santiment emphasized that the U.S.-China trade talks will remain central to short-term crypto market sentiment, particularly among retail investors. “If Trump and Xi’s discussions lead to positive developments, sentiment will recover,” the firm said. “But if tensions escalate, expect a flood of ‘Bitcoin under $100K’ predictions.”
Meanwhile, the Crypto Fear & Greed Index plunged to 27, shifting from “Greed” to “Fear” in just 24 hours — its lowest level in nearly six months.
“Bitcoin, whether we like it or not, is behaving more like a risk asset than a safe haven during times of geopolitical stress,” Santiment concluded.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.