Crypto Crisis: Not Just Trump Tariffs—The Real Reasons Behind the Crash Run Deeper, Says Santiment
By: DR. KEYNAAN | October 13, 2025
The recent sharp crash in the cryptocurrency market sent shockwaves across the globe, with Bitcoin ($BTC) falling over 10% in 24 hours. The initial and most popular narrative among retail traders was simple: President Trump's renewed threat of massive tariffs on China.
However, according to leading analytics firm Santiment, this knee-jerk reaction misses the crucial underlying factors. While geopolitical tension was the spark, the real fire was fueled by a market structure ripe for collapse. This analysis dives deep into why the crash happened, combining geopolitics with hard market data from Santiment and The Kobeissi Letter.
Part I: The Trader’s Psychology: Why Simple Blame Prevails (Santiment)
Santiment's research highlights a common psychological phenomenon during market downturns: the need for a single, easy explanation.
1. The Search for a Single Enemy
Santiment's Saturday report noted that retail crypto traders immediately pointed the finger at Trump's tariff news.
* Social Media Surge: Discussions about both crypto and tariffs exploded right after the crash.
* Instant Consensus: This fast, collective agreement among retail investors demonstrates a preference for simple explanations for large losses, even when the real causes are far more complicated.
* Sentiment Driver: The firm warns that U.S.-China relations news will continue to heavily drive retail trading decisions and overall market sentiment for the foreseeable future.
Part II: The Real Culprit: Excessive Leverage and Liquidation Cascade
While geopolitics provided the trigger, the true mechanism of the crash was rooted in leveraged trading, a structural weakness of the current market.
1. The $16.7 Billion Wipeout (The Kobeissi Letter)
Analysts at The Kobeissi Letter provided concrete numbers revealing the market’s vulnerability before the crash.
* Extreme One-Sided Bets: The data showed a massive imbalance in the market, with approximately $16.7 billion in long positions getting wiped out, compared to only $2.5 billion in shorts.
* 7-to-1 Split: This near 7-to-1 ratio indicates the market was heavily over-leveraged and leaning bullishly. When the tariff news hit, this excessive leverage triggered a devastating chain reaction known as a liquidation cascade. As longs were forcibly sold, the price plummeted, forcing more liquidations and amplifying the crash far beyond what the tariff news alone could have caused.
2. Bitcoin Acts Like a Risky Asset, Not a Safe Haven
The crash also shattered the narrative that Bitcoin is acting as "digital gold" or a safe haven during geopolitical heat.
* Sharp Price Drop: BTC fell over 10% in 24 hours, with futures briefly touching $102,000 following Trump's announcement, confirming its classification as a high-risk asset.
* The Sub-$100,000 Warning: Santiment specifically warned that worsening U.S.-China relations could trigger widespread predictions of BTC dropping below $100,000.
Part III: The Sentiment Shift: From Greed to Fear
The emotional shockwave was instantly visible in key market indicators.
1. The Historic Drop in the Fear & Greed Index
The Crypto Fear & Greed Index, a tool measuring market emotion, captured the swift mood change:
* 37-Point Fall: The index plummeted from 64 (Greed) on Friday to 27 (Fear) on Saturday.
* Six-Month Low: This 37-point drop was the biggest change recorded in nearly six months.
A reading of 27 (Fear) signifies that traders are withdrawing capital due to widespread uncertainty, often signaling a period of panic selling.
Conclusion: The Path Forward for Traders
The cryptocurrency market is currently caught between external geopolitical factors and internal structural risks.
While positive trade talks between Washington and Beijing could restore retail confidence and sentiment, the underlying issue of leverage remains.
* Focus on Technicals: Smart traders must look beyond the easy headlines. The leverage wipeout was a technical correction that needed to happen.
* Sentiment as a Guide: The dramatic swing captured by the Fear & Greed Index suggests that current prices are now driven by fear, which could sometimes indicate a long-term buying opportunity for those who manage risk effectively.
* Link to Other Articles:
* To learn how to profit from this volatility, read our guide on: Modern Opportunities: How Somali Youth Can Benefit from Crypto & AI Technology.
* For a deep dive into risk management during crashes, check out: The Hidden Cost of FOMO: Managing Emotions in Crypto Trading.
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