Bitcoin continued its recent bearish trajectory over the past day as the price of the asset has now fallen 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 market intelligence platform IntoTheBlock, BTC is floating just above a critical zone of on-chain demand. Demand zones refer to the price ranges where many investors last purchased their coins.
These ranges can be determined through on-chain analytics, as the average cost basis of each address on the network can be easily calculated through transaction history.
Below is the chart shared by the analytics firm showing various price ranges close to the current price of assets in terms of current demand.
In the graph, the size of the dot corresponds to the number of addresses purchased within the respective range. It appears that Bitcoin currently has large demand zones both just above and below it.
According to data from IntoTheBlock, the lower tier currently represents the cost base of approximately 1.23 million addresses for investors who purchased 319,700 BTC. Now, what is the importance of a demand zone like this?
For any investor, the cost basis is important, so when the price challenges him, he may become more inclined to make some moves. Of course, if many holders shared their breakeven level within a narrow range, the reaction resulting from a retest would also be large.
For this reason, areas of greatest demand are considered important support or resistance levels for Bitcoin. Cost base centers above price can serve as walls of resistance, while those below can provide cushions of support.
As BTC sits just above an important demand zone between $61,900 and $63,800 following its latest decline, it is possible that the range could help the asset reach the bottom.
As for the origin of the support or resistance effect provided by these demand zones, the answer lies in investor psychology. Holders currently at a loss may expect the price to hit their cost base to exit with their initial investment.
This selling that could occur following a retest of the break-even level shared by many investors may represent resistance to BTC. Likewise, investors below may react to a retest by buying more, as they may view the decline as a bearish opportunity, thus supporting the asset.
It now remains to be seen whether the support zone between $61,900 and $63,800 will put an end to Bitcoin’s recent bearish momentum or not.
Bitcoin 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 from Dall-E, IntoTheBlock.com, chart from TradingView.com
