Cardano (ADA), a prominent smart contract platform, faces potential downside risks according to crypto analyst Benjamin Cowen. In a recent analysis, Cowen highlights the possibility of a significant price correction for ADA, particularly if the Federal Reserve maintains its current monetary policy stance and refrains from implementing quantitative easing (QE). He suggests that if ADA mirrors its behavior from the previous cycle, marked by a 56% drop, its price could plummet below $0.60, a level reminiscent of its prior low. Furthermore, if the Fed continues to hold off on QE, an even steeper decline towards the $0.357 level remains a possibility. This projection reflects the potential impact of macroeconomic conditions on the cryptocurrency market.
Cowen’s analysis delves into the technical indicators for ADA, reinforcing the prospect of a substantial price dip. Specifically, he examines the interplay between ADA’s 20-week simple moving average (SMA) and its 21-week exponential moving average (EMA). The bull market support band, a key metric derived from the ADA/Bitcoin trading pair, also offers insights into the asset’s potential trajectory. Cowen observes that ADA recently breached this support band but managed to close the week near its 20-week SMA. Earlier in the year, ADA hovered just above its 21-week EMA. These technical observations suggest a vulnerability to further downward movement.
The convergence of these moving averages further underscores the potential for a significant price correction. Cowen notes that the 20-week SMA for ADA currently sits around $0.56, while the 21-week EMA is approximately $0.67. These levels align with his earlier projection of a possible drop to around $0.53, reinforcing the confluence of technical indicators pointing towards a potential downward trend.
The absence of QE, a monetary policy tool involving the purchase of financial assets by a central bank to inject liquidity into the economy, plays a pivotal role in Cowen’s bearish outlook for ADA. QE tends to create a more favorable environment for risk assets, including cryptocurrencies. By holding off on QE, the Fed maintains a tighter monetary policy, potentially dampening investor enthusiasm and putting downward pressure on asset prices. This cautious approach from the Fed, coupled with the technical indicators, forms the basis for Cowen’s pessimistic forecast.
Comparing ADA’s current price with its recent performance provides context to the potential downside risks. At the time of Cowen’s analysis, ADA was trading at $0.89, reflecting a 3% increase over the past 24 hours. However, this price point represents a significant drop from its value of $1.21 on December 2nd. This recent decline, combined with Cowen’s analysis, paints a picture of a cryptocurrency potentially poised for further downward movement.
In summary, Benjamin Cowen’s analysis presents a cautious outlook for Cardano (ADA), suggesting a possible price correction of substantial magnitude. His analysis is anchored in the potential for the Federal Reserve to maintain its current course without resorting to quantitative easing, a move that could exert downward pressure on the cryptocurrency market. The technical indicators, including the convergence of the 20-week SMA and 21-week EMA around the $0.53-$0.67 range, further corroborate the possibility of a significant dip. While ADA experienced a marginal daily gain at the time of the analysis, its recent price history, coupled with Cowen’s bearish forecast, warrants close monitoring by investors.
