(MENAFN- Crypto Breaking) Crypto markets experienced a sharp decline Friday, with retail traders quick to attribute the downturn to President Donald Trump 's announcement of a 100% tariff on China. However, analysts suggest the real drivers behind the slump extend beyond geopolitical tensions, highlighting deeper risk factors within the crypto sector and broader market sentiment shifts.

• Market decline linked to US-China tariff announcement, but rooted in broader leverage and risk issues.
• Bitcoin and other cryptocurrencies saw significant liquidations amid heightened volatility.
• Crypto retail sentiment deteriorated to its lowest in nearly six months, reflecting increased fear.
• Developments between the US and China will be critical for short-term crypto trading decisions.
• Potential for Bitcoin to dip below $100,000 if geopolitical tensions escalate further.

Cryptocurrency markets faced a notable downturn on Friday, with traders quick to assign blame to the recent announcement by U.S. President Donald Trump of a 100% tariff on Chinese imports. This move sparked widespread social media debates and increased volatility across digital assets, with many seeing it as a cue for risk aversion. Still, industry analysts argue that the decline is more complex, driven by internal market risks and sentiment shifts rather than geopolitics alone.

The spike in discussions around US-China tariff concerns surged among crypto market participants. Source: Santiment

“After the crash, the crypto community rapidly began to seek explanations, with social media buzzing about both market fundamentals and geo-economic tensions,” Santiment noted. The emotional response underscores the heightened sensitivity of retail traders to external events, even as broader systemic issues underpin the market's recent vulnerability.

US-China Tensions Will Remain Central for Retail Traders

While the tariff announcement was a catalyst for the recent decline, analysts from The Kobeissi Letter emphasized that excessive leverage and market risk played significant roles. An estimated $16.7 billion in long crypto positions were liquidated amid the sell-off, compared to $2.5 billion in shorts, a ratio of nearly 7-to-1. Bitcoin (BTC ) fell over 10% within 24 hours, with futures on Binance dipping to as low as $102,000 after Trump's tariff news.

Bitcoin is trading at $109,910 at the time of publication, down 10.06% over the past week. Source: CoinMarketCap

Santiment underscored that developments in US-China relations will remain pivotal for retail investors' short-term trading decisions. Positive news emerging from higher-level talks could improve sentiment, but escalating tensions could trigger further declines, including forecasts of Bitcoin dropping below $100,000.

Market Sentiment Flips to Fear Ahead of Potential Further Declines

The crypto Fear & Greed Index plummeted to 27, from 64 the previous day, signaling a rapid shift toward risk-off sentiment. This drop - the lowest in nearly six months - reflects growing anxiety among traders and a cautious tone amid ongoing geopolitical uncertainty.

“Bitcoin, whether we like it or not, is behaving more like a risk asset than a safe haven during times of country tensions,” Santiment commented, hinting that external political shocks may continue to influence mainstream perceptions of crypto's safe haven utility.

As investor sentiment wanes, market analysts warn that more bearish price forecasts could become reality. With increased volatility and risk aversion, traders are bracing for potential further declines in cryptocurrency prices, especially if geopolitical tensions between the U.S. and China escalate further. The coming days are likely to determine whether market fears will ease or intensify, influencing the trajectory of Bitcoin and the broader crypto markets in the near term.

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Crypto assets are highly volatile. Your capital is at risk. Don't invest unless you're prepared to lose all the money you invest.

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