Bitcoin
This is where the next support is
Bitcoin continued its recent downward trajectory over the past day as the asset’s price fell below $64,000. This is what the next support for BTC looks like.
Bitcoin has strong on-chain support between $61,900 and $63,800
According to data from the market intelligence platform Inside the block, BTC is floating just above a critical demand zone on the network. Demand zones refer to the price ranges where many investors last purchased their coins.
These ranges can be determined through on-chain analysis, as the average cost basis of each address on the network can be easily calculated through its transaction history.
Below is the chart shared by the analytics firm that shows the various price ranges close to the asset’s current price in terms of current demand.
In the graph, the size of the point corresponds to the number of addresses acquired within the respective range. It appears that Bitcoin currently has large demand zones just above and below itself.
According to data from IntoTheBlock, the lower band currently holds the cost base of around 1.23 million addresses for investors who purchased 319,700 BTC. Now, what is the relevance of a demand zone like this?
For any investor, their cost basis is important, so when the price tests it, they may be more likely to make a move. Naturally, if many holders shared their breakeven level within a narrow range, the reaction resulting from a retest would also be large.
For this reason, the highest demand zones are considered important support or resistance levels for Bitcoin. Cost base centers above price can act as walls of resistance, while those below can provide cushions of support.
As BTC is hovering just above a high demand zone between $61,900 and $63,800 following its last declineIt is possible that the range could help the asset reach a bottom.
As for the origin of the support or resistance effect provided by these demand zones, the answer lies in the psychology of the investor. Holders currently at a loss may be eager for the price to reach their cost basis to exit with their initial investment.
This sell-off that may appear after a retest of the break-even level shared by many investors could represent resistance to BTC. Likewise, investors below may react to a retest by buying more, as they could view the decline as an opportunity to fall, thus supporting the asset.
It now remains to be seen whether the support zone between $61,900 and $63,800 would put an end to Bitcoin’s recent downward momentum or not.
BTC Price
After the latest drop, Bitcoin has just entered the on-chain demand zone as its price is now trading around $63,600.
Featured image by Dall-E, IntoTheBlock.com, chart by TradingView.com