Back in May 2019, the Federal Reserve made its first rate cut, lowering rates from 2.42% to 2.39%. At the time, the public debt was at $22 trillion, and Cardano experienced a sharp decline. Fast forward to today, the debt has soared to nearly $35 trillion and interest rates are now at 5.33%, more than double the 2019 levels.
The correlation between rate cuts and cryptocurrency declines was evident in 2019, and a similar setup could be on the horizon again. Crypto has shown a relationship with traditional finance in the past, and with the Federal Reserve likely to announce another rate cut, Cardano could face significant downside pressure.
Taking a closer look at Cardano’s technical indicators, warning signs are flashing for ADA. The Stochastic RSI and MACD are both indicating bearish momentum, with the SRSI sliding towards the oversold region. The MACD line has crossed below the signal line, further confirming downward pressure.
The Visible Range Volume Profile (VRVP) adds to the negative outlook for Cardano, showing weak support levels within the current price range. The biggest volume bar starts at $0.15, indicating a strong support zone at that level. If Cardano continues to drop, there is little trading activity to slow down the decline until it reaches the $0.15 zone.
While Cardano is currently within a macro Fibonacci golden pocket, offering some support between $0.2951 and $0.3204, the price has already fallen below the 78.6% retracement on multiple Fibonacci levels. This raises doubts about the strength of the golden pocket in the long term. A stronger support level lies at $0.2349, which was respected during the 2022 bear market.
In the coming months, Cardano could face a multi-month decline following the potential rate cut by the Federal Reserve. Despite the possibility of a dead cat bounce before the Fed meeting, a cautious approach would be to wait for ADA to drop below the $0.2951 golden pocket before shorting. This strategy offers a safer entry point compared to shorting immediately and could help navigate the potential downtrend ahead.
Ultimately, while there are some factors that could prevent Cardano from dropping sharply, the overall sentiment remains bearish, and investors should proceed with caution. The current market conditions, coupled with historical trends, suggest that Cardano could be in for some major downside in the weeks and months ahead.
Disclaimer: This article is for educational purposes only and should not be considered as investment advice. It is essential to conduct thorough research and consult with a financial advisor before making any investment decisions.
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