Cardano (ADA) has experienced significant losses in recent weeks, following a decline in market sentiment and risk appetite in the cryptocurrency market. The price of ADA has dropped by over 5% in the past week and almost 27% in the last three months. However, on Wednesday, the cryptocurrency saw some gains, with its total market capitalization increasing by more than 5.62% and trading volume rising by 17% in the last 24 hours.
The overall cryptocurrency market was in the green on Wednesday, breaking away from the bearish trend observed in the past week. The total market capitalization of the crypto market reached $1.07 trillion, marking a 3% increase in the last day. Bitcoin and Ethereum, two prominent cryptocurrencies, also experienced gains of nearly 4%, with Bitcoin trading at $26,582 and Ethereum at $1,685. Cardano recorded a 6% increase in price during the same period.
Despite these gains, the Crypto Fear and Greed Index indicates a decline in market sentiment, suggesting that the bearish trend may persist in the short term. The index reading on Wednesday stood at 34, reflecting a decrease in global risk appetite and an increase in selling pressure.
The recent selloff in the cryptocurrency market can also be attributed to concerns over potential interest rate hikes by the US Federal Reserve. In July, the central bank raised rates by a quarter percentage point after pausing in the previous month. Minutes released by the Federal Open Market Committee (FOMC) last week hinted at possible further rate hikes in 2023.
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The meeting summary stated, “With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.”
However, the market appears to believe that the Federal Reserve is less likely to raise rates than the central bank itself suggests. According to the CME FedWatch Tool, based on interest rate futures, there is an 88.5% probability of another pause in rate hikes in September.
Analyzing the daily chart, the Cardano price has seen a steep decline in recent weeks, failing to gather enough momentum to surpass the crucial level of $0.2785. The asset remains below both the 50-day and 200-day exponential moving averages, as well as the 50-day and 100-day simple moving averages. The Relative Strength Index has slightly moved above the signal line but remains below the neutral level, while the MACD indicator remains in the red.
Based on these indicators, it is likely that the Cardano price will continue to drop in the short term, with bears focusing on the next important support levels at $0.2520 and $0.2205. However, if the price manages to move above the bullish support level at $0.2785, it could trigger a bullish breakout towards the 50-day Exponential Moving Average.
In conclusion, Cardano has experienced significant losses in recent weeks, but it saw some gains on Wednesday amidst a broader positive trend in the cryptocurrency market. However, market sentiment remains cautious, and concerns over potential interest rate hikes by the US Federal Reserve continue to impact the market. Traders and investors should closely monitor the support and resistance levels to make informed decisions about their Cardano investments.
