On-chain data suggests minimal resistance for Bitcoin, which could facilitate a rally toward a new all-time high (ATH).
Almost All Bitcoin Investors Are Back In The Green With Latest Recovery
According to data from the market intelligence platform , resistance looks light in the price ranges ahead. In on-chain analysis, the strength of support and resistance levels is based on the number of investors who last bought their coins at them.
The chart below shows what the cost basis distribution on the Bitcoin network looked like at the time of the analytics firm’s post.
In the graph, the size of the dot corresponds to the addresses that purchased their coins inside the corresponding range. As is apparent, when IntoTheBlock shared the data, the price ranges ahead all had small dots, while those below had big ones.
This suggested that few investors left in the market had their cost basis higher than the spot price. That is, there weren’t many holders in loss left anymore.
Since then, however, BTC has seen some pullback into the first of the big circles. Nonetheless, at the current price, most holders should still be in the green.
To any investor, their cost basis is naturally an important level, and they may be more likely to make a move when a retest of it happens. Investors in loss may look forward to such a retest to exit at their break-even to escape away with their initial investment.
A few investors selling at their break-even isn’t of any consequence to the entire market, but if a large amount of them share their cost basis inside a narrow range, then perhaps a reaction large enough to cause fluctuations in the price can emerge.
This is why the strength of support and resistance price levels is related to the number of investors who have their cost basis in on-chain analysis.
As investors in loss may react to a retest of their cost basis by selling, large red dots can be potential sources of resistance. However, BTC has no significant obstacles left, so the price could be set to travel to higher levels.
As investors in loss react by selling, those in profit can look at the retest of their acquisition level as an opportunity to buy more instead. Thus, green dots can be support centers for the cryptocurrency. As BTC has fallen to one of these green dots, it’s possible the coin can use the cushion to spear ahead at the relatively light red ranges.
Something to keep in mind, however, is that while there may not be many investors desperate to exit at their break-even, there is also a different obstacle BTC could face: profit-taking.
With an extreme majority of investors in profits, many would likely become tempted to harvest some of their gains as the coin surges toward a new ATH. It remains to be seen whether demand would be able to absorb this potential selloff.
BTC Price
Bitcoin had neared the $70,000 level earlier in the day, but the coin has since plunged towards the $67,800 mark.
Featured image from Dall-E, IntoTheBlock.com, chart from TradingView.com
Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.
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Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.
In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.
Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.
Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..
Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.
Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.
As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.
Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.
Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.
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