Bitcoin has continued its recent bearish trajectory over the past day as the asset’s price 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
This is evident from data from the market information platform InTheBlokBTC hovers just above a critical demand zone in the chain. Demand zones refer to price ranges where many investors last purchased their coins.
These ranges can be determined through on-chain analysis because 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 company showing the different price ranges near the current asset price in terms of current demand.
In the graph, the size of the dot corresponds to the number of purchased addresses within the relevant range. It appears that Bitcoin currently has large demand zones both just above and below itself.
According to data from IntoTheBlock, the lower range currently has the cost base of approximately 1.23 million addresses for investors who purchased 319,700 BTC. What is the relevance of a demand zone like this?
For any investor, their cost basis is important, so if the price tests this, they are more likely to make a move. If many holders share their breakeven level within a narrow range, the reaction resulting from a retest would obviously also be large.
For this reason, high 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.
Since BTC is hovering just above a key demand zone between $61,900 and $63,800 after the latest decline, it is possible that this range could help the asset bottom out.
As for the source of the support or resistance effect of these demand zones, the answer lies in investor psychology. Those holders who are currently making losses can look forward to the price hitting their cost base to exit the market with their initial investment.
This selling, which may occur upon a retest of many investors’ shared breakeven level, could provide resistance to BTC. Similarly, the investors below may respond to a retest by buying more as they may view the decline as a dip opportunity, 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 bearish momentum or not.
BTC price
After the latest decline, Bitcoin has just entered the on-chain demand zone as the price is now trading around $63,600.