The failure of Congress to boost American morale in early 1778 through the release of an address can be attributed most directly to the reality that Americans were beginning to lose hope of winning their independence. By that time, the Revolutionary War was turning out to be a long and grueling conflict, with many battles resulting in heavy losses for the Continental Army. As a result of setbacks, such as the harsh winter at Valley Forge, many soldiers were discouraged, and enlistments were low. This contributed to a general sense of pessimism among the populace about the war effort.
While there may have been other factors at play, such as Congress hoping for donations of supplies or seeking to rally support, the overarching sentiment was likely rooted in the people's diminishing hope and growing war weariness. This makes "Americans were beginning to lose hope of winning their independence" the best reflection of the situation during that time.