Strong Job Growth in the U.S. Boosts Expectations for Interest Rate Hikes
Cardano is a blockchain platform that facilitates transactions using its native cryptocurrency, ADA, and provides a foundation for developers to create secure and scalable applications. The platform is linked to numerous payment systems, and it is important to note that many projects have been built on Cardano’s ecosystem.
Founded in 2017 by technologists Charles Hoskinson and Jeremy Wood, Cardano is governed by three independent organizations, namely the Cardano Foundation, IOHK (co-founded by Hoskinson and Wood), and Emurgo (a company promoting the adoption of Cardano’s technology).
ADA is required to complete transactions and participate in governance. Token ownership determines who becomes a slot leader, adds new blocks to the blockchain, and receives a portion of transaction fees. ADA tokens are also used to vote on software policies, including the inflation rate, encouraging participants to hold ADA and secure its future value.
The Market Shows High Volatility
September was a difficult month for the cryptocurrency market, and ADA followed the trend, closing the month with a negative performance as investor interest waned and macroeconomic conditions worsened. Economists have cautioned that a global recession could be looming, especially if central banks continue their aggressive actions. The U.S. Federal Reserve adopted a stricter approach to combating inflation, raising interest rates and signaling further hikes in its new projections.
This Friday, the U.S. reported stronger-than-expected job growth for September, which increased the likelihood of the Federal Reserve continuing its aggressive interest rate hikes. Nonfarm payrolls rose by 263,000 jobs, surpassing the 250,000 forecasted by economists surveyed by Reuters.
The unemployment rate dropped to 3.5%, lower than the expected 3.7%, which also heightened concerns about future interest rate hikes from the Federal Reserve. Analysts now estimate a 94.1% chance of a 75 basis-point rate hike during the Federal Reserve’s November meeting. Jefferies economists Thomas Simons and Aneta Markowska commented:
“We don’t think today’s report changes the Fed’s stance. There’s no justification for slowing the pace of the 75-basis-point hikes, so we expect another one in November.”
Investors fear that an aggressive rate hike policy could trigger an even larger sell-off, and as a result, Cardano (ADA) may struggle to maintain its current price levels. It’s important to note that the cryptocurrency market is often correlated with the stock market, so a downturn in the stock market often results in similar declines in the crypto market. Investors are becoming more cautious about riskier assets, and the market will remain highly sensitive to any remarks from the Federal Reserve.
Technical Analysis of Cardano (ADA)
Cardano (ADA) has dropped from $0.59 to $0.41 since August 14, 2022, and its current price is $0.42. Traders should be aware that the risk of further decline is not over, and analysts expect the U.S. Federal Reserve to continue its aggressive approach to combat inflation by raising interest rates.
In the chart below, ADA has been fluctuating within the range of $0.40 to $0.60 in recent months. As long as the price remains below $0.80, a trend reversal is unlikely, and ADA remains within the SELL-ZONE.
Key Support and Resistance Points for Cardano (ADA)
On this chart (dating from November 2021), I have marked significant support and resistance levels to help traders predict price movements. Cardano (ADA) is still under pressure, but if the price rises above $0.70, the next resistance target could be $0.80. The current support level is $0.40, and a drop below this level would signal a “SELL,” leading to a potential decline to $0.35. A drop below $0.30, which is considered very strong support, could see the price heading toward $0.20.
Indicators Suggesting Cardano’s Price Could Increase
The outlook for Cardano in the fourth quarter of 2022 looks challenging, with low market sentiment that remains affected by the downturn in global stock markets and the persistent strength of the U.S. dollar.
The Fed’s continued aggressive monetary policy is negatively impacting the broader market. Although ADA trading volume has decreased over recent weeks, if the price climbs above $0.60, the next target could be around $0.70. Traders should also consider the correlation between ADA and Bitcoin; if Bitcoin’s price exceeds $22,000, we may see ADA reach higher levels than its current price.
Factors Pointing to a Potential Decline for Cardano (ADA)
The upside potential for ADA remains limited in Q4, especially after the Federal Reserve’s recent statements indicating no interest rate cuts until 2024. Investors are concerned that further aggressive rate hikes could trigger a deeper sell-off, and Cardano (ADA) may struggle to stay above current price levels.
Economists have warned of a potential global recession, and many believe that ADA’s price could decline even further. While ADA is currently priced above $0.40, if it falls below this level, the next target could be around $0.35 or even $0.30.
Analysts’ Price Predictions for Cardano (ADA)
The overall cryptocurrency market remains bearish, driven by a lack of demand and negative macroeconomic conditions. The total market capitalization of the cryptocurrency industry recently dropped by 2.1% to $982.8 billion, according to CoinGecko data. The latest U.S. job report has raised the likelihood of continued interest rate hikes by the Federal Reserve.
Analysts now place the probability of a 75 basis-point rate hike at 94.1% when the Federal Reserve meets in early November. Investors are anxious that another aggressive rate hike will lead to a significant sell-off, and Cardano (ADA) may find it difficult to hold onto current price levels. Brandon Pizzurro, director of public investments at GuideStone Capital Management, stated that the worst is yet to come, and new lows for the cryptocurrency market could be ahead.
