Cardano (ADA) Price Prediction: ADA Eyes Annual Lows Under $0.40 Pre-US CPI Data

Key Points

• Major cryptocurrencies have rebounded somewhat from Tuesday’s lows as traders await the release of June US CPI data.
• Cardano’s recent decline has opened the door to a test of annual lows around $0.39.
• Should an upside inflation surprise trigger another crypto dump, ADA is at risk of falling to sub-$0.20 levels.

Market Update

The macro mood is nervous and non-committal, with major US equity index futures currently flat in pre-market trade ahead of the release of key US Consumer Price Index (CPI) data for June at 1230GMT. US bond markets are also broadly flat, as are currency markets, with the US Dollar Index (DXY) consolidating close to the multi-decade highs it hit earlier in the week as EUR/USD hovers just above the parity mark.

In terms of crypto, major coins are seeing a bit of a technical rebound from Tuesday’s lows this Wednesday but remain within Tuesday’s intra-day ranges. Big moves prior to the release of the upcoming US CPI data are unlikely. Bitcoin was last around $19,800, up 2.5% from Tuesday’s lows in the $19,200s.

The world’s largest cryptocurrency is currently probing a key support uptrend from mid-June. A break below this level could trigger a drop back to late-June lows in the mid-$18,000s and perhaps a test of annual lows in the mid-$17,000s. Such a move would likely weigh heavily on major altcoins, so Bitcoin is worth keeping an eye on (as usual!).

Traders will recall that this time last month, the release of May Consumer Price Index data caused a melt-down in risk assets like stocks and crypto and a temporary surge in US (and global) bond yields. The data showed the headline rate of price growth hitting a new four-decade high at 8.6%, with headline prices also rising more than 1.0% MoM.

This alarmed the Fed. A few days later, the US central bank opted to implement its largest rate hike in 28 years of 75 bps (taking the target interest rate range to 1.50-1.75%), citing a deterioration in the near-term inflation outlook. The minutes from that Fed meeting plus recent public commentary from Fed policymakers has got markets betting that the central bank will implement another 75 bps rate hike later this month (taking the target interest rate range to 2.25-2.50%).

But policymakers have signaled that they see the pace of rate hikes slowing to 50 bps at the September meeting. Another big upside inflation surprise later this Wednesday could change this thinking and put a 75 bps rate hike in September on the table. That would probably go down very badly with risk assets and could trigger another crypto dump.

Markets have been pricing in an increased risk of a near-term US recession (hence why longer-term US bond yields are actually back below their mid-June levels) and aggressive rate hikes from the Fed are seen as a key risk to the economic outlook. Thus, should inflation figures on Wednesday surprise to the downside, that could ease fears about an overly hawkish Fed and support crypto.

For more on how crypto might react to the upcoming CPI report, read here.

Cardano (ADA) Price Prediction

The native token to Cardano’s layer-1, smart-contract enabled blockchain ADA was last trading a little over 3.0% higher on the day on Wednesday in the $0.43 area, having recovered from a dip on Tuesday to as low as $0.415. Not a bad recovery, but ADA/USD is still trading within Tuesday’s intra-day range and is still down about 7.0% since the start of the week and over 12% down versus last week’s near-$0.50 peaks.

Traders are trying not to draw too many conclusions from Wednesday’s intra-day price action given the upcoming release of US Consumer Price Inflation data at 1230GMT. As noted above, this data release could be a big catalyst for crypto markets, so traders are for now refraining from placing any big ADA/USD bets.

Looking at ADA from a technical perspective, the cryptocurrency’s fall in the last few days has opened the door to a test of yearly lows at $0.39, given that its near-term technical outlook has significantly worsened. ADA/USD broke below a pennant structure that had been information since mid-June, and below an upwards support trendline from mid-May on Monday.

The cryptocurrency then swiftly proceeded to briefly fall below the June lows at $0.42 on Tuesday. Though ADA/USD has since recovered back above this low on Wednesday, the door is now unlocked for a drop to annual lows, should broader crypto sentiment deteriorate later in the session/week.

With ADA/USD having recovered back towards its late-June lows in the $0.4350 area, some bears may see current levels as an attractive area to add to short positions given the downbeat near-term technical bias.

ADA at Risk of Slump to Sub-$0.20 Levels

Traders will recall that an upside surprise in US CPI back in June triggered a melt-down in cryptocurrency (and stock) markets, with markets forced to quickly price in a much more aggressive Fed tightening outlook for the coming months. Though an exact repeat of events is unlikely, traders should be aware of the risk that another upside inflation surprise triggers another crypto crash.

In terms of what this could mean for Cardano’s ADA, things could get ugly. The annual low at $0.39 is actually a key area of support going all the way back to 2018. A break below could open the door to a cascade of selling pressure that could see ADA collapse all the way to sub-$0.20 levels, given there are no notable areas of support until the November 2020 highs around $0.18.

A collapse to these levels would mark a furthermore than 55% fall from current levels. This would take the drawdown from November 2021’s record highs above $3.0 to a catastrophic more than 95%.