Fear runs deep in the crypto market as major cryptocurrencies re-test critical support levels. On December 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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(…) 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. However, a run into new highs could see an obstacle as the macro-economic outlook turn complex.
The Crypto Market At Risk For Macro Factors?
QCP Capital believes the selloff was caused by fear of the new COVID-19 variant, Omicron, inflation concerns, weakness in the Chinese stock market, and the possibility that the U.S. FED begins to taper its asset purchasing program.Related Reading | How Crypto Champions can help you increase the rarity of your NFT
This indicates persistent selling out of China. In contrast, funding rates in other exchanges normalised very quickly (…). With the persistent negative funding in Chinese exchanges, we reckon a push higher in spot could actually trigger a short-squeeze.The crypto market already shows signs of this short squeeze, but it could face more downside due to the aforementioned macroeconomic factors.