Back in 2019, Cardano experienced a significant drop of 57% when the Federal Reserve made its first rate cut. This move triggered a chain of events that led to a prolonged downtrend for the cryptocurrency. Fast forward to the present day, with another rate cut on the horizon, Cardano faces a similar setup that could potentially result in major downside for the digital asset.
As of now, the public debt stands at a staggering $35 trillion, with interest rates at a level of 5.33%, which is more than double the rates from 2019. The correlation between rate cuts and crypto declines has been observed in the past, and with the Federal Reserve likely to cut rates once again based on CME data, Cardano could be in for a rough ride ahead.
Taking a closer look at Cardano’s technical indicators, the monthly Stochastic RSI and MACD are flashing warning signs. The SRSI has been sliding since March 2024 and is approaching oversold conditions, indicating a bearish momentum. Similarly, the MACD has crossed below the signal line on the monthly chart, signaling downward pressure. The Visible Range Volume Profile (VRVP) also suggests weak support within the current price range, with a significant volume bar starting at the $0.15 level.
Despite the bearish outlook, there are a few factors that could prevent Cardano from dropping sharply. The cryptocurrency is currently within a macro Fibonacci golden pocket, which has acted as support so far. However, ADA has already fallen below the 78.6% retracement on multiple Fibonacci levels, casting doubt on the strength of the current support zone. A stronger support level lies at $0.2349, which was respected during the 2022 bear market.
In light of the upcoming Fed meeting and the potential rate cut, it is advisable to adopt a cautious approach when trading Cardano. A dead cat bounce before the meeting could present a short-term opportunity, but a 2-3 month downtrend is expected post-rate cut. Waiting for ADA to drop below the $0.2951 golden pocket before shorting could offer a safer entry point. However, if the price falls below this level, shorting down to $0.2349 becomes a more calculated move.
While the outlook for Cardano may seem bleak in the short term, it is essential for traders to exercise caution and conduct thorough analysis before making any investment decisions. The market dynamics are subject to change, and a comprehensive understanding of the technical indicators and market conditions is crucial for navigating through volatile times. Remember, this article is for educational purposes only and does not constitute investment advice.
