On-chain data suggests minimal resistance for Bitcoin, which could facilitate a rally toward a new all-time high. According to data from the market intelligence platform IntoTheBlock, resistance appears light in the price ranges ahead. In on-chain analysis, the strength of support and resistance levels is determined by the number of investors who last bought their coins at those levels.
A chart provided by IntoTheBlock reveals the cost basis distribution on the Bitcoin network at the time of the analytics firm’s post. In this graph, the size of each dot corresponds to the addresses that purchased their coins within the corresponding range. Distinctly, the price ranges ahead all exhibited small dots, indicating fewer investors had bought at those levels, while those below had significantly larger dots.
This suggested that few investors remaining in the market had their cost basis higher than the current spot price, meaning there were not many holders still at a loss. Following this, Bitcoin experienced a slight pullback into the first of the major support zones. Despite this, at the current price, most holders should still find themselves in a profit.
To any investor, their cost basis is fundamentally important, and they may be more inclined to act when a retest of this level occurs. Investors who are at a loss may anticipate such a retest to exit at their break-even point, thereby recuperating their initial investment. While a few investors selling at their break-even point may not significantly impact the overall market, a substantial number of them with a shared cost basis in a narrow range could trigger price volatility.
The strength of support and resistance levels is thus closely tied to the number of investors who hold their cost basis in these ranges in on-chain analysis. Investors at a loss may react by selling during a retest of their cost basis, making large clusters of such investors potential sources of resistance. However, Bitcoin currently faces no significant obstacles, implying the price could advance to higher levels.
Meanwhile, investors in profit may perceive a retest of their acquisition level as an opportunity to buy more. Consequently, these levels could serve as support centers for the cryptocurrency. As Bitcoin has fallen to one of these support points, the coin could leverage this cushion to push ahead through the relatively light resistance ahead.
Another potential challenge Bitcoin might encounter is profit-taking. With a considerable majority of investors currently in profit, many might be tempted to lock in their gains as the coin approaches a new all-time high. It remains uncertain whether market demand would be sufficient to absorb this potential selloff.
Earlier in the day, Bitcoin had neared the $70,000 level, but has since dipped to around $67,800. The price of the coin appears to have retraced during the past day.
