Back in 2019, Cardano experienced a significant drop of 57% when the Federal Reserve made its first rate cut. The decrease in interest rates from 2.42% to 2.39% at that time triggered a downward trend in the cryptocurrency market. Fast forward to the present day, the debt has ballooned to almost $35 trillion, and interest rates now stand at 5.33%, more than double the levels seen in 2019. With another rate cut looming on the horizon, Cardano could be setting up for another major decline.
The previous rate cut in 2019 resulted in a prolonged downtrend for Cardano, which lasted until the early months of 2020. The market saw a brief recovery, followed by further declines coinciding with the COVID-19 pandemic and subsequent rate cuts. While the exact relationship between rate cuts and crypto declines remains uncertain, there is a clear pattern of decreased value in Cardano and the broader market following such events. It is worth noting that correlations between traditional finance and the crypto market have been observed in the past, including during the 2019 rate cut.
Looking ahead, the Federal Reserve’s upcoming meeting is expected to result in another rate cut based on CME data. If history repeats itself, Cardano could face a multi-month decline similar to what was seen in 2019, potentially lasting until the end of the year or even early 2025. Analysts suggest that Cardano’s price could plummet to around $0.15 in such a scenario, based on previous trends and market behavior.
Taking a closer look at technical indicators, Cardano’s monthly Stochastic RSI (SRSI) and Moving Average Convergence Divergence (MACD) are signaling potential bearish trends. The SRSI has been sliding since March 2024 and is nearing oversold conditions. The MACD line has already crossed below the signal line, indicating downward pressure, with the histogram on the verge of turning red. Additionally, the Visible Range Volume Profile (VRVP) shows weak support within Cardano’s current price range, with a notable support zone at $0.15. If Cardano continues to decline, there may be little resistance until it reaches this critical level.
Despite the bearish indicators, there are a few factors that could prevent Cardano from experiencing a sharp decline. The cryptocurrency is currently within a macro Fibonacci golden pocket, which has acted as support between $0.2951 and $0.3204. However, ADA has fallen below the 78.6% retracement on multiple Fibonacci levels, raising concerns about the sustainability of the current golden pocket. A stronger support level lies at $0.2349, a key line respected during the 2022 bear market. While the current price of $0.315 is still above this support, a potential 25% decline to $0.2349 would not be an ideal scenario for Cardano.
In light of these developments, traders are advised to adopt a more cautious approach when dealing with Cardano. A potential dead cat bounce may occur before the September 18 Federal Reserve meeting, followed by a 2-3 month downtrend until the rate cuts slow down. Waiting for Cardano to drop below the $0.2951 golden pocket before considering short positions could offer a safer entry point. This strategy allows for a more calculated move, especially if Cardano sees a temporary uptrend while holding above the golden pocket. Shorting below this level down to $0.2349 could be a strategic move for traders looking to capitalize on potential downside risks.
It is important to note that the information provided in this article does not constitute investment advice. The content and materials presented are for educational purposes only, and individuals should conduct their own research and seek professional guidance before making any financial decisions.
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