Bitcoin has continued its recent downward trajectory over the past day with the asset's price now falling below $64,000. Here's what the next support for BTC looks like.
Bitcoin has strong on-chain support between $61,900 and $63,800
According to market intelligence platform data IntoTheBlock, BTC is floating just above the critical on-chain demand zone. Demand zones refer to the price ranges where many investors last bought their coins.
These ranges can be determined through on-chain analysis, where the average cost basis of each address on the network can be easily calculated from its transaction history.
Below is the chart shared by the analytics company which shows the different price ranges near the current asset price in terms of current demand.
In the chart, the point size corresponds to the number of addresses purchased within the respective range. Bitcoin currently appears to have large demand zones directly above and below itself.
According to IntoTheBlock data, the lower band currently holds a cost basis of approximately 1.23 million addresses for investors who purchased 319,700 Bitcoin. Now, why is a demand zone like this important?
For any investor, cost basis is important, so when the price tests it, they may become more vulnerable to making some moves. Of course, if multiple holders share their breakeven level within a narrow range, the reaction resulting from the retest will also be significant.
For this reason, key demand areas are important support or resistance levels for Bitcoin. Cost basis positions above the price can act as walls of resistance, while those below can provide cushions of support.
With BTC hovering just above the key demand zone between $61,900 and $63,800 after its recent decline, the range could help the asset reach the bottom.
As for the source of the support or resistance effect provided by these demand areas, the answer lies in the investor's psychology. Holders who are currently at a loss may look for the price to reach their cost basis to exit their initial investment.
This selling, which may appear upon a retest of the breakeven level common to many investors, could constitute resistance for Bitcoin. Likewise, investors below can react to the retest by buying more, as they can view the decline as a pullback 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 recent drawdown, Bitcoin has just entered the on-chain demand zone, with its price now trading at around $63,600.