I suspect it has something to do with the block outline drawing bug (since it only triggers when you're pointing at a block)

Check your crash report if it says "drawBlockOutline" somewhere in the stack trace.

If that is the case, downgrade to Fabric api 0.32.5. A fix is being worked on but won't come out until at least this weekend.

This occurs for me too now, running fabric-api-0.32.5+1.16 with canvas-mc116-1.0.1511.

This doesn't occur with fabric-api-0.32.5+1.16 / canvas-mc116-1.0.1267.

java.lang.NoSuchMethodError: 'void net.fabricmc.fabric.impl.client.rendering.WorldRenderContextImpl.prepareBlockOutline(net.minecraft.class_1297, double, double, double, net.minecraft.class_2338, net.minecraft.class_2680)'

However, running fabric-api-0.34.6+1.16 with canvas 1.0.1511 seems to load up fine.

1.0.1511 is the fix. Now you need to upgrade your fabric api to 0.34.2. 0.32.5 and below is no longer compatible.

If no further information is provided, I'm gonna assume this is duplicate of #234