Cardano’s technical setup looks promising, but the difficult fundamental backdrop suggests that downside risks continue to mount.

Cardano (ADA) continues to hold above the 200DMA, a key support level for the past 6 weeks, with traders wondering whether this is the perfect time to buy.

Indeed, buying ADA at the 200DMA has proven to be a great short-term trading strategy in recent weeks.

After testing the 200DMA in early February, Cardano rallied 50% in 10 days. Meanwhile, after falling back to the 200DMA in late February, Cardano rallied as much as 80% by early March.

Is history about to repeat itself?

Well, traders would be wise to realize that the situation in the crypto market today is very different from what it was a few weeks ago.

Trump’s announcement that Cardano would be included in the US strategic cryptocurrency reserve in early March was the catalyst for that incredible rally.

However, ADA was not included in the digital asset vault, and the government has not announced any plans to include ADA in the vault in the future.

Meanwhile, after much speculation that Cardano founder Charles Hoskinson would meet with key officials in the Trump administration in February, he was ultimately ignored and not even invited to the administration’s crypto event earlier this month.

At its final price of $0.72, Cardano is down about 40% from its highs from the previous month, which is reasonable given the price declines caused by the hype.

Cardano is suffering amid a weakening crypto market as macro conditions worsen.

Earlier this week, the Fed threw bulls a curveball when it slowed its quantitative tightening.

But the outlook for the US economy remains gloomy, with risks to growth and inflation still rising.

The worsening macroeconomic backdrop could easily trigger a fresh bear market in the crypto market in the coming weeks, and Cardano could easily lose the 200DMA.

How low can Cardano go?

Just as a convincing break above the 200DMA in early November signaled the start of a strong uptrend, a convincing break below the 200DMA in the coming weeks could signal the start of a fresh downtrend.

It is entirely possible that Cardano will soon retest its February low at $0.55 and potentially even find support as a mid-2024 high at $0.40.

Should you buy Cardano at this price? Well, that depends on your risk tolerance.

Cardano could do very well in the coming years. Its blockchain has a lot of potential for real-world adoption, especially as it pivots to become the go-to Bitcoin DeFi chain.

However, this is highly speculative. In its many years of existence, Cardano has failed to achieve anywhere near the real-world adoption of competitors like Bitcoin, Ethereum, and Solana.

That said, despite the worsening macroeconomic situation, there is still a risk that major cryptocurrencies will see a surge in growth before Trump’s term ends.

The US President has specifically singled out crypto as an industry he wants to support, as he reiterated in his speech today.

Growth in the industry as a whole is expected to “improve everything,” meaning Cardano could do very well over the next few years.

So buying it on dips is probably not a bad idea. However, cryptocurrencies with better adoption records like Bitcoin, Ethereum, and Solana are probably safer bets with arguably similar upside potential.