Trump Tariff Remarks Trigger Crypto Market Plunge: Structural Vulnerabilities Take Center Stage

The cryptocurrency market experienced a sharp downturn in response to remarks by U.S. President Donald Trump regarding new tariffs against China. Although the immediate cause may seem geopolitical, industry analysts argue that the steep decline was primarily driven by inherent structural weaknesses within the crypto market.

On October 11, blockchain-based analytics firm Santiment published a detailed report analyzing the situation. The report concluded that “excessive leverage and high-risk exposure” were the fundamental contributors to the unprecedented liquidation event, describing Trump's tariff announcement as merely the spark igniting a broader systemic issue.

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Rationalization: A Psychological Pattern in Market Responses

Santiment identified the market reaction as a clear example of "rationalization," wherein investors instinctively attribute major market moves to external events. The report explained, “Retail participants often link dramatic downturns to discrete events to make sense of market behavior.”

The aftermath of Trump's comments saw crypto liquidations climb to roughly $19.3 billion (approximately 27 trillion won)—an all-time record in the history of digital assets. Simultaneously, online exchanges surged with narratives connecting the U.S.-China trade conflict to the declining crypto prices. However, Santiment highlighted that “although the tariff announcement served as a catalyst, the overheated and over-leveraged market conditions accelerated the cascade of liquidations.”

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The Role of U.S.-China Trade Negotiations in Market Sentiment

Looking forward, Santiment underlined the significance of developments in U.S.-China trade relations as a key determinant of cryptocurrency market sentiment in the short term. The report offered a dual outlook: “If tariff negotiations between President Trump and President Xi Jinping progress positively, we could see a resurgence in investor optimism. Conversely, deteriorating trade relations may exacerbate downward pressure across Bitcoin (BTC) and other digital assets.”

Interestingly, Santiment pointed out Bitcoin's behavior during escalating geopolitical tensions. “Bitcoin increasingly acts like a risk asset during international strife, rather than a traditional safe-haven asset,” the analyst firm cautioned. This dynamic could revive bearish narratives, including theories predicting Bitcoin’s plunge to the $10,000 threshold.

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Fear Dominates: A Dive in Investor Confidence

Investor sentiment has taken a significant hit, as illustrated by the Fear & Greed Index tumbling to 31—signaling a pervasive climate of “fear.” This marks a sharp decline from last week’s neutral reading of 50 and represents the index's lowest position in six months, reinforcing concerns about growing hesitation within the market.

As structural vulnerabilities and geopolitical uncertainty cast shadows over the crypto landscape, market participants maintain a watchful eye on forthcoming macroeconomic developments. Whether global trade negotiations provide a reprieve or deepen market instability will profoundly influence the trajectory of digital assets in the immediate future.