Fear is spreading deep in the crypto market as major cryptocurrencies retest critical levels of support. On December 3rdrd, the price of bitcoin fell to a low of $ 40,000, resulting in a record number of liquidated positions on various exchange platforms.
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At the time of writing, almost every cryptocurrency appears, but Bitcoin in the top 10 by market capitalization is showing signs of recovery. The reference cryptocurrency is trading just north of $ 50,000 after being declined to $ 51,500 with small losses in the last 24 hours.
Data from Arcane Research shows that the index of fear and greed fluctuates with the price of large cryptocurrencies according to market capitalization. Over the past week, this metric has stood at “Fear” levels until its crash on Friday when it further fell into “Extreme Fear”.
Although the metric managed to bounce from the lowest value to 16, it now has 25 in the metric, almost 50 points less than in November when it stood at Greed with 73. The index is still close to its annual lows and closer to fasting – Levels in May 2021 .in the year when the increase in sales pressure dropped the prices of each major cryptocurrency.
These levels remained at their lowest levels from that time until mid-August, when Bitcoin finally broke above $ 40,000 and reached the highest level of all time at $ 69,000. Arcane Research noted the following:
(…) Panic spread through the market after the weekend sale. We haven’t seen such a terrible market in almost four months. Market sentiment jumped from its lowest level on Tuesday as the market recovered strongly, but we are still in the realm of “fear” (…).
The “Fear and Greed” index at the levels of extreme fear, according to some analysts, has historically preceded the local bottom of the crypto market. However, the rush to new highs could be an obstacle as the macroeconomic outlook becomes more complex.
Crypto market in danger due to macro factors?
QCP Capital believes the sell-off is caused by fears of a new variant of COVID-19, Omicron, concerns about inflation, weaknesses in China’s stock market and the possibility that the U.S. Fed is starting to narrow its asset purchase program.
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The Chinese crypto market is particularly concerned. This has turned into constant negative funding rates on exchange platforms. QCP Capital claimed:
This indicates persistent sales from China. In contrast, financing rates on other stock exchanges normalized very quickly (…). With persistent negative funding on Chinese stock exchanges, we believe that more pressure on the ground could cause short-term pressure.
The crypto market is already showing signs of this brief pressure, but could face more downsides due to the aforementioned macroeconomic factors.