Retail bitcoin traders quickly attributed Friday’s sharp market decline to US President Donald Trump’s announcement of a 100% tariff on China.

According to sentiment analytics firm Santiment, this type of reaction is common among retail participants, who often seek a clear narrative for market downturns:

“This is typical ‘rationalization’ behavior from retailers, who need to point to a singular event as the reason for a cataclysmic downturn in crypto.”

Analysts cite leverage concerns

However, analysts from The Kobeissi Letter argue that the market slump was driven by more than just tariffs.

They highlighted excessive leverage and risk across the market, noting that about $16.7 billion in long positions were liquidated, compared to only $2.5 billion in shorts—a long-to-short ratio of nearly 7-to-1.

The significant liquidation came as bitcoin fell more than 10% within 24 hours, with the BTC/USDT futures pair on Binance dropping as low as $102,000.

US-China talks seen as central

Santiment emphasized that developments between the US and China will remain vital for retail trading decisions in the near term.

If talks between Trump and Chinese President Xi yield positive developments, retail sentiment is likely to recover.

Conversely, escalating tensions could trigger more pessimistic forecasts, with Santiment warning:

“Expect for the ‘Bitcoin sub-100K’ prediction floodgates to begin opening up.”

Sentiment falls sharply

The recent plunge in bitcoin price coincided with a sharp decline in market sentiment.

The bitcoin fear and greed index dropped to a “Fear” level of 27, down from 64 (“Greed”) the previous day—its lowest in nearly six months.

For more on bitcoin’s current and historical sentiment cycles, see the bitcoin fear and greed chart.

Bitcoin is currently trading around $111,610, down over 10% for the week, as traders weigh both geopolitical and market risk factors.