Smart money buys the dip against the trend: How did Trump's tariffs trigger a dumping wave and become a retail investor's "FUD trap"?

The on-chain analysis platform Santiment shows that during the big dump in the market triggered by President Trump’s announcement last week to impose a 100% tariff on Chinese goods, "Smart Traders" took advantage of retail investors' overreaction to FUD (fear, uncertainty and doubt) by buying up a large amount of Bitcoin and alts. Santiment analyst Brian Q pointed out that retail investor sentiment often contradicts market price movement. This event is one of the four "panic peaks" since 2025 caused by political and macroeconomic events, each creating a good opportunity for sharp-eyed buyers to get on board. Although Bitcoin has shown signs of recovery, the Crypto Fear & Greed Index is currently still in the "fear" range.

Reverse Operation of "Smart Money": Accumulating Chips by Utilizing Panic

Santiment's analysis reveals significant differences in trading behaviors among different investor groups during periods of market turmoil, confirming the classic investment philosophy of "be greedy when others are fearful."

· Retail Investor Sentiment and Market Reversal: Santiment analyst Brian Q emphasized that the sentiment of retail investors often signals an impending market reversal. During last Friday's big dump, the share of discussions related to Trump's trade policies in the cryptocurrency space surged sharply, with retail investors exhibiting "the highest negative sentiment levels of the year."

· Arbitrage at the peak of panic: Brian Q summarizes that there have been four key dates driving the "crowd panic peak" this year, including: the first round of global tariffs announced in April, geopolitical tensions in the Middle East (Iran, Israel, and the United States) in June, concerns over the Federal Reserve not lowering interest rates in August, and the recent tariff statements by Trump. On these dates, "smart traders" always intensify their accumulation during crowd panic.

· FUD drives retail investors to exit: A survey conducted by a mainstream platform in December 2024 among 1,248 encryption users shows that 81% of respondents were influenced by FUD when investing, and 63% admitted that emotional decisions negatively impacted their portfolios.

Political News Drives Short-Term Market Behavior: Common Patterns in 2025

Santiment observed that emotional trading related to political news is dominating the short-term market behavior of cryptocurrencies, with this pattern being particularly evident in 2025.

· Emotional trading dominates: Analysts point out that emotional trading related to political news dominates short-term market behavior, to an extent "arguably more than we have ever seen in crypto’s 17+ year history." (which can be said to be unprecedented in the 17-year history of cryptocurrency).

· "Panic - Return" mode: Last Friday's big dump and the subsequent rebound perfectly replicated a common pattern from 2025: retail investors were "shaken out" due to fear, and once the political topics that triggered the fear were proven to be "exaggerated or futile", they quickly got on board again, allowing the investors who bought the dip to profit.

· The influence of Trump's remarks: As the crypto market is driven by sentiment, the trader community collectively decides which news will affect their confidence. There is enough evidence to suggest that any new developments regarding Trump's tariff comments will have an immediate impact on the market, subsequently triggering a price reversal.

Fear and Greed Index: Market sentiment remains low

Despite the market beginning to recover, the overall sentiment indicators remain in the panic zone, suggesting that there may still be further room for a rebound in the market.

· Index Score: The Crypto Fear & Greed Index, which measures overall market sentiment, returned a "Fear" score for the second consecutive day, with a score of 38 (range 0 to 100).

· Panic bottom: On Sunday, during the peak of market panic and sell-off, the index fell to 24 points, the lowest level since April.

· Emotional Contrast: Last week, the average score of the index was 70, in the "Greed" zone. The current low score of the index reflects a rapid shift in retail investor sentiment from extreme greed to fear, providing an emotional window for "smart money" to continue to get on board in the short term.

Conclusion

Santiment's on-chain data clearly reveals the binary opposition between emotional fluctuations and trading behavior in the encryption market: macro-political events are the spark that triggers market panic, while a high-leverage environment and retail investor sentiment serve as the gunpowder. This big dump is another successful case of "smart traders" validating their contrarian strategies. Against the backdrop of the current fear and greed index still being low, a recovery in market sentiment may continue to drive short-term price rebounds. Investors should be wary of the emotional fluctuations brought about by political news, viewing market panic as a potential get on board opportunity rather than a reason for blind selling.

This article is news information and does not constitute any investment advice. The encryption market is highly volatile, and investors should make cautious decisions.