ADA, the cryptocurrency that supports Cardano’s smart contract-enabled Layer 1 blockchain protocol, is under selling pressure on Friday in tandem with the broader cryptocurrency markets. ADA /USD last traded hands at $0.37, down about 1.5% on the day, with the cryptocurrency dependent on lower US stocks and higher USD and yields on a hotter-than-expected inflation report in the USA.
The PCE Price Index report for January was released earlier on Friday and showed a bigger-than-expected jump in core inflation for the month to 0.6% from 0.4% in December, which was also revised higher from a previous estimate of 0.3 %. The latest data raised fears that the Fed may have to raise interest rates for a longer period of time, hence the risk-on reaction in crypto and traditional asset classes.
ADA’s latest drop means it is now more than 10% below its previous monthly high of $0.42s and back below its 200-day moving average at $0.3815. Cardano is currently at a technical crossroads and today’s close will be key.
What’s Next for Cardano (ADA)?
ADA is currently testing an uptrend that has been in place since late 2022. If it breaks below this trendline and its 50DMA just below $0.37, a drop to the recent double bottom around $0.35 is likely. However, if the crypto bulls regain control and can push ADA to close the Friday session above the 200DMA, then a retest of recent highs around $0.42 will become more likely.
Can Cardano (ADA) reach $3 this year?
The Cardano ecosystem will almost certainly continue to grow in 2023 thanks to its large and dedicated community of supporters and developers who continue to launch useful new protocols on the blockchain, including the recently redundant algorithmic stablecoin Djed. Assuming cryptocurrency markets continue their gradual recovery from last year’s highly oversold levels, ADA can certainly continue to rise.
However, with US inflation remaining persistently high and the economy still growing well, the outlook for significant easing of financial conditions is not good. In other words, 2023 is likely to see at least three more Fed rate hikes and possibly no rate cuts until the end of the year. It will likely take a series of rate cuts for the cryptocurrency to truly recover.
In this sense, ADA reaching $3.0 (almost 10x earnings from current levels) this year seems unlikely. But the bulls should not lose heart. Cardano has an excellent chance of maintaining its place as the dominant blockchain, and as broader cryptocurrency adoption increases in the coming years and decades, a rise to $3.0 is likely at some point. But the bulls will have to be patient.
