Institutions Buy the Dip as Retail Investors Panic Over Trump Tariffs

TLDR

• Santiment analyst Brian Q says retail investors overreacted to Trump’s 100% China tariff announcement while smart traders bought the dip
• Crypto markets experienced four major fear-driven selloffs in 2025 tied to political events including tariffs and Middle East tensions
• A Kraken survey found 81% of crypto users are motivated by FUD when investing and 63% admitted emotions hurt their portfolios
• Historical patterns show major market dumps of 30-60% preceded altcoin rallies in previous bull market cycles
• The Crypto Fear & Greed Index dropped to 24 on Sunday, its lowest level since April, before recovering to 38

Onchain analytics platform Santiment released data showing that experienced traders used recent market fear as a buying opportunity. The pattern emerged after Bitcoin and altcoins dropped following President Trump’s tariff announcements.

Santiment analyst Brian Q identified four key dates in 2025 when crowd fear peaked. These included Trump’s 100% tariff against China announcement, the first round of global tariffs in April, Middle East tensions in June, and Federal Reserve rate cut concerns in August.

The market crash on Friday saw widespread selling across cryptocurrencies. However, investors returned quickly after Trump modified the tariff plan. Treasury Secretary Scott Bessent clarified there had been a misunderstanding and said the tariffs “don’t have to happen.”

Brian Q noted this has become a common pattern in 2025. Retail investors exit positions based on fear and then re-enter after confirming the news was overblown.

Emotional Trading Dominates Market Behavior

The analyst stated that emotional trading tied to political news now dominates short-term market behavior more than ever in crypto’s 17-year history. Trump’s tariffs have shown instant impacts on market reversals whenever new developments occur.

A December 2024 Kraken survey of 1,248 crypto users supports these findings. The survey found 81% of respondents were motivated by fear, uncertainty and doubt when investing. Another 63% admitted that emotional decisions had negatively affected their portfolios.

The Crypto Fear & Greed Index registered a score of 38 on Tuesday, marking the second consecutive day in fear territory. On Sunday, the index dropped to 24, its lowest level since April. Last week, the index averaged 70, which falls in greed territory.

Altcoins experienced heavy losses during the weekend selloff. XRP dropped 18%, Solana fell 22%, Dogecoin declined 28%, Cardano lost 25%, and Chainlink decreased 26% in one day.

Historical Patterns Point to Potential Altcoin Rally

Crypto analyst Bull Theory observed that every major expansion in crypto has included sharp 30% to 60% resets. March 2020 saw almost 70% wiped from markets during the pandemic crash. May 2021 experienced over 50% in losses.

The previous bull market cycle included at least five other 30% to 40% altcoin drops. Each of these events was followed by strong rallies, according to Bull Theory.

Analyst Ash Crypto pointed to the March 2020 flash crash, which preceded a major altseason where altcoins pumped 25x to 100x. The analyst expects a similar pattern to emerge.

Analyst Merlijn The Trader identified a monthly bullish MACD cross on the BTC/altcoins chart. This same pattern occurred in 2017 and 2021 before major altcoin rallies.

The total crypto market capitalization fell below $4 trillion on Tuesday. Bitcoin declined 1.4% and dropped below $113,500 on Tuesday morning. Bitcoin dominance formed its first red weekly candle in five weeks as it fell below 59%.

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