Cardano faced a significant drop of 57% back in 2019 when the Federal Reserve initiated its first rate cut. Fast forward to the present day, and the cryptocurrency is once again on the tipping point as another rate cut looms. Back in 2019, rates were much lower at 2.39%, with public debt standing at $22 trillion. Today, the debt has skyrocketed to nearly $35 trillion, and interest rates have more than doubled to 5.33%. This alarming rise in debt coupled with higher interest rates sets the stage for potential major downside for Cardano.
In 2019, when the rates began to fall, Cardano experienced a sudden drop in value. Although there was a brief recovery period, the downtrend extended for months, only to be met with further declines during the COVID-19 pandemic. The correlation between rate cuts and crypto declines was evident, and the upcoming Federal Reserve meeting is likely to result in another rate cut based on CME data. If history repeats itself, Cardano could see a multi-month decline, potentially lasting until the end of the year before a recovery in early 2025.
September has traditionally been a tough month for both stocks and crypto. Looking at Cardano’s monthly Stochastic RSI and MACD, warning signs are flashing that should not be ignored. The Stochastic RSI has been sliding since March 2024, nearing oversold conditions. The MACD is equally bearish, with the MACD line crossing below the signal line, indicating downward pressure. The Visible Range Volume Profile (VRVP) adds further negative pressure, showing weak support at current price levels.
While there are bearish signals pointing towards a potential decline in Cardano’s price, there are factors that could prevent a sharp drop. The cryptocurrency currently sits within a macro Fibonacci golden pocket, acting as support. However, falling below the 78.6% retracement on other Fibonacci levels raises doubts about the strength of this support. A stronger support level lies at $0.2349, but with Cardano hovering around $0.315, a drop to that level would still represent a significant decline.
In the coming weeks, there could be a dead cat bounce before the Fed meeting on September 18. However, a 2-3 month downtrend is expected beyond that point until the Fed eases off its rate cuts. Traders are advised to wait for Cardano to drop below the $0.2951 golden pocket before considering shorting. This strategic approach offers a safer entry point compared to immediate shorting, allowing for better risk management in a volatile market environment.
It is crucial to note that the content presented in this article is for educational purposes only and should not be considered as investment advice. Traders and investors are urged to conduct thorough research and analysis before making any financial decisions in the cryptocurrency market.
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