Crypto Market “Etreme Fear” Metric Reaches Multi Month Low

As major crypto currencies retest their critical support levels, fear runs rampant in the market. Dec. 3Rd, Bitcoin’s price wicked into the lows at $40,000 resulting in a record number of liquidated positions across exchange platforms.

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Nearly every cryptocurrency is showing signs of improvement at the moment, except Bitcoin, which was in the 10 largest by market capital. Following its rejection at $51,500 and small losses during the previous 24-hours, the benchmark crypto trade is now just above $50,000.

Bitcoin BTC BTCUSD crypto
BTC moves sideways on the 4-hour chart Source: BTCUSD tradingview

Arcane Research’s data shows that fear and greed index has fluctuated in line with crypto-market cap. During the last week, this metric stood in the “Fear” levels right up until Friday’s crash when it dipped further into “Extreme Fear”.

The metric rebounded from 16 points at the bottom and now has a score of 25. This is almost 50 more than November’s Greed index with 73. It is close to the yearly lows and nearer to levels post-May 2021 when a rise in selling pressure led to a drop in crypto prices.

These levels were unchanged from mid-August until Bitcoin broke through $40,000 at an all time high. Arcane Research found the following:

(…) panic spread across the market following the weekend sell-off. We haven’t seen such a fearful market in almost four months. The market sentiment bounced off the lows on Tuesday as the market recovered strongly, but we are still in the “fear” area (…).

A “Fear and Greed” Index on Extreme Fear levels, according to certain analysts, has historically preceded crypto market local bottoms. A run to new heights may prove difficult as macro-economic conditions become more complicated.

Are Macro Factors Putting the Crypto Market at Rise?

QCP Capital believes that this selloff was caused in part by Omicron, the new COVID-19 version, inflation concerns and weakness in the Chinese stock markets. It also suggests the U.S. FED may begin to reduce its asset purchase program.

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Concerns are especially present in the Chinese crypto market. This has resulted in persistently low funding rates for all platforms. QCP Capital claims:

This is a sign of China’s persistent selling. In contrast, funding rates in other exchanges normalised very quickly (…). A push for spot higher could trigger a quick squeeze, given the ongoing negative funding situation on Chinese exchanges.

Although the crypto market is already showing signs of this squeeze, it may face further downsides due to macroeconomic factors.

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