Santiment says the “Trump tax” isn’t the only force behind crypto’s sharp sell-off

Blaming crypto’s latest plunge on a so-called “Trump tax” makes for a neat narrative—but it misses how many forces hit the market at once. On-chain and market-structure signals show a classic multi-factor drawdown in which sentiment, leverage, and liquidity all aligned to the downside.

First, leverage amplified every tick lower. Elevated open interest and crowded long positioning meant that a modest dip triggered cascading liquidations across perpetual swaps. As funding turned negative and basis compressed, forced sellers overwhelmed organic dip-buyers.

Second, liquidity thinned at the worst possible time. Weekend and off-hours trading left order books shallow, so relatively small market sells pushed price through pockets of resting bids. Once key supports broke, algorithmic momentum strategies accelerated the move.

Third, options dynamics mattered. Negative gamma near popular strike zones nudged dealers into selling into declines, exacerbating intraday volatility and widening candles beyond spot flow alone.

Fourth, flows and cash demand shifted. Stablecoin supply growth slowed, ETF and exchange inflows cooled, and risk appetite faded alongside a firm dollar and higher real yields—macro headwinds that usually pressure speculative assets.

Fifth, supply overhangs resurfaced. Miner treasuries, long-dormant coins, and treasury rebalancing by large holders added drip-selling that kept rallies capped. Whale behavior turned from absorption to distribution as bid depth evaporated.

Sixth, narratives rotated. Regulatory noise, headlines around policy proposals, and earnings-season risk aversion encouraged profit-taking after a strong prior leg higher. When the story gets messy, sidelined capital tends to wait for clarity.

Finally, psychology completed the loop. As funding flipped, social sentiment plunged, and fear indexes spiked, traders reduced exposure first and asked questions later. In short: the sell-off was not about a single policy meme; it was a confluence of leverage, thin liquidity, options positioning, macro pressure, and supply dynamics.

For investors, the takeaway is structural: monitor open interest, funding, order-book depth, stablecoin growth, and options gamma alongside headlines. Those metrics often foreshadow whether a dip is a buy—or the first domino in a bigger unwind.