Cardano (ADA) will undergo a major network upgrade called “Vasil” on September 22, which could make its blockchain more scalable and cheaper. However, the news has failed to spark a decisive bullish push in the ADA market.
Macro factors weigh on ADA’s best bullish scenario
In detail, the price of ADA has risen roughly 3.5% to $0.51 since the announcement of Vasil’s implementation, including a rally of around 14% followed by its near disappearance. In other words, traders initially bought into the Vasil hype, but rushed out of the markets, as the price action below illustrates.
Cardano founder Charles Hoskinson blamed to “macro-economic factors” for ADA’s underperformance despite Vasil’s euphoria, noting that cryptocurrency markets, in general, are “out of touch with reality.” He added:
“Cardano has never been stronger and honestly a lot of other projects are also strong across the industry, yet it doesn’t show, just a sea of red.”
The remarks came as riskier assets braced for another deep drop in the days leading up to the Federal Open Market Committee (FOMC) meeting on September 20-21.
The markets believe that Federal Reserve officials will vote to raise benchmark interest rates by another 0.75% on September 21. In general, the US central bank intends to raise rates to 3.75% or 4% by the end of 2022.
A high-rate environment could hurt Cardano and other large-cap crypto assets, as it is likely to increase the attractiveness of cash-based instruments among investors.
Is a “mini” Cardano rally coming?
From a technical standpoint, Cardano seems poised to experience a mini rally in the days leading up to the Vasil hard fork.
On the four-hour chart, ADA price is testing a confluence of support for a potential bounce move. This confluence is formed by a multi-week rising trend line and a support bar highlighted on the chart below.
Suppose ADA bounces off the junction. So, the immediate upside target for ADA is around $0.50. This level is a meeting point of two resistance levels: a “multi-week downtrend line” and a “target mid-level” that has served as a price ceiling since mid-August.
Meanwhile, a break above $0.50 could see the ADA bulls test $0.53 as their main upside target, a level with significant history as resistance. In other words, ADA could make a 15% profit before the Vasil hard fork compared to its current price.
However, ADA looks weaker on its longer-term charts, with its three-day performance revealing the presence of a bearish continuation pattern dubbed the “descending triangle”.
ADA risks a drop to $0.26 if it breaks decisively below the lower trend line of its descending triangle, per the rules of technical analysis. In other words, a price drop of almost 40% from current prices.
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