- The FOMC is hesitant to introduce rate cuts soon.
- After Fed Chair Jerome Powell’s speech, the crypto market experienced a significant downturn, with Cardano plummeting by double digits.
- Nevertheless, Cardano now finds itself in an interesting position.
The Federal Reserve finds itself locked in an intense two-year struggle with inflation as commodity prices surge, unemployment rates fluctuate, and markets teeter on the edge of chaos. While the central bank offered some reprieve after pausing rate hikes last year and promising rate cuts in 2024, inflation still has yet to cool down.
With the third FOMC meeting of the year behind us, hopes for a rate cut have severely dimmed, leading to turmoil in the crypto market. Bitcoin, Ethereum, Cardano, and others are tumbling toward demand zones, signaling tumultuous times ahead.
The FOMC’s Hesitance Shakes the Market
On May 1, all eyes turned to the FOMC meeting as policymakers gathered to assess the current economic landscape in the US and gauge the possibility of introducing rate cuts as promised. However, hopes were dashed by Fed Chairman Jerome Powell’s hawkish stance, indicating slim chances of cuts anytime soon, with rates likely to remain at a 23-year high of 5.25%.
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Powell emphasized that the committee vigilantly analyzes data, searching for positive indicators to justify rate adjustments. Yet, with inflation stubbornly hovering at 3.5% as of March, the outlook remains uncertain, hindering progress towards the Fed’s target 2% inflation rate.
Until a more promising trajectory toward the desired inflation rate materializes, Powell affirmed that the FOMC’s stance will remain unchanged. In the aftermath of Powell’s press conference, the crypto market experienced significant turbulence, with Cardano plummeting by 10% to $0.42 within a single day.
Echoing the prevailing market anxiety following the FOMC meeting, Cardano’s open interest also sank to its lowest level of the year at $207 million.
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The lack of open interest suggests that market participants are treading carefully as they observe Cardano’s trajectory from the sidelines before making any bets. However, despite the current turmoil, Cardano now finds itself in an interesting position.
Cardano Lands in Whales’ Demand Zone
Previously, when Cardano’s open interest was at the $200 million market, ADA witnessed a remarkable surge from $0.46 to $0.67, primarily fueled by buying pressure from Whales. With open interest currently subdued, Cardano whales are strategically biding their time on the sidelines, awaiting an opportune moment to enter the market.
Data reveals that the $0.42 to $0.49 range holds particular favor among whales, who tend to accumulate substantial amounts of ADA when it hovers around this level.
According to IntotheBlock, when ADA dropped below $0.5 earlier this year, Whale transactions surged to 7,000 from the typical 5,000. In a matter of days, these large wallets amassed over $14.34 million worth of Cardano, while retail investors offloaded their holdings out of fear that ADA might decline further.
On the Flipside
- ADA’s yearly growth has since fallen to a loss of 30% from peaking at a gain of 63% in March.
- The Federal Reserve has kept the policy rate on hold since July 2023 to anchor high inflation.
- After the Fed’s previous meeting in March, Bitcoin swiftly surged from $60,000 to $68,000.
Why This Matters
The FOMC’s decision to introduce rate cuts signals that inflation in the country is cooling down. However, a reluctance or lack of confidence from the central bank in executing these cuts can trigger market turbulence, impacting investors’ confidence in external markets such as crypto.
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