In 2019, Cardano experienced a significant drop of 57% when the Federal Reserve decided to cut rates. Now, with another rate cut on the horizon, the cryptocurrency faces a similar setup that could potentially lead to major downside. It is important to note that in 2019 the rates were at 2.39% and the public debt was considerably lower at $22 trillion. Fast forward to today, the debt has surged to almost $35 trillion and interest rates currently stand at 5.33%, more than double the levels seen in 2019.
When the rates started to fall in 2019, Cardano experienced a sudden drop in value. Despite a brief recovery period, the downtrend persisted for months until early 2020. An uptrend emerged later but was met with market downturns due to the COVID-19 pandemic and further rate cuts. Although the exact link between rate cuts and crypto declines remains uncertain, it is evident that Cardano, along with the broader market, saw a clear decrease in value.
The Federal Reserve’s upcoming meeting is likely to result in a rate cut according to CME data. If the market follows the 2019 pattern, Cardano could potentially face a multi-month decline, lasting until the end of the year before showing signs of recovery in early 2025. This repetition of the previous trend could potentially push Cardano’s price down to around $0.15. Additionally, historical data shows that September has proven to be a tough month for both stocks and crypto which could further contribute to Cardano’s downward trajectory.
Taking a closer look at technical indicators, Cardano’s monthly Stochastic RSI (SRSI) and MACD are currently flashing warning signs that should not be ignored. The SRSI, measuring momentum by analyzing an asset’s price range over time, has been declining since March 2024 and is now approaching oversold conditions. The MACD is also exhibiting bearish signals with the MACD line crossing below the signal line and the histogram hinting at a growing bearish momentum. Moreover, the Visible Range Volume Profile (VRVP) indicates weak support within Cardano’s current price range, with a notable support level at $0.15.
Even though Cardano is currently within a macro Fibonacci golden pocket zone as a temporary support, it has already fallen below the 78.6% retracement level from various points. This raises questions about the strength of the current support zone and the possibility of it not holding up in the long run. A more substantial support level lies at $0.2349, which was respected during the 2022 bear market. However, with Cardano’s current price at $0.315, a drop to that support level would still represent a 25% decline, posing challenges for investors.
There could be a dead cat bounce in the short term before the September 18 Fed meeting. However, post the meeting, Cardano may face a 2-3 month downtrend until the Fed eases the pace of its rate cuts. A cautious approach would be to wait for Cardano to drop below the $0.2951 golden pocket before considering shorting. This strategy provides a safer entry point compared to shorting immediately as Cardano may witness a temporary uptrend while holding above the golden pocket. If the price falls below this level, shorting down to $0.2349 becomes a more calculated move. It is important to note that this article does not offer investment advice and is purely for educational purposes.