One analyst has pointed out two areas of demand that could be important for bitcoin. Here's what could be next for btc based on these supply walls.
bitcoin On-Chain Support and Resistance Levels Could Provide Clues to What's Next
As analyst Ali explains in a new mail At X, bitcoin has recently been floating between two major supply walls for the asset. “Supply wall” refers to the amount of bitcoin that is purchased at any given price range.
The chart below shows what the different btc supply walls look like for the ranges around the cryptocurrency's current spot price.
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/01/47600-or-38600-What-could-be-next-for-Bitcoin.jpeg" alt="bitcoin On-Chain Support and Resistance” width=”2350″ height=”874″ loading=”lazy”/>
The data for the on-chain support and resistance levels | Source: @ali_charts on X
In the chart above, the size of the dot represents the number of coins that investors bought within the corresponding range. It would appear that the $41,200 to $42,400 and $42,400 to $43,700 ranges are noticeably full of supply.
To be more particular, in the first range 1.92 million addresses purchased a total of 723,490 btc, while in the second there was an accumulation of 706,400 btc from 1.67 million holders.
For any investor, your acquisition price or cost basis is an important level, as when the asset's price is retested, your profit and loss situation can potentially change. As such, incumbents are more likely to show some reaction when such a new test is carried out.
Naturally, just a few investors showing a reaction will not affect the market, but if many addresses share their cost base within a narrow range, the reaction from a retest could end up being considerable.
For this reason, major supply walls (like the two mentioned above) may end up being important tests for bitcoin. Generally, the asset is more likely to feel support when this retest occurs from above, while the coin might feel some resistance when it is from below.
These effects seem to be due to how investor psychology tends to work; An investor who was already profitable before the retest might want to take more risk, believing that the same price range will become profitable again. These purchases are the source of support.
Similarly, loss holders would be tempted to sell when the price reaches its breakeven point as they may not want to risk holding the currency any longer as the currency could go back down, sinking them again.
bitcoin has been trading between two major supply walls during its recent consolidation. “A sustained close beyond these limits will help gauge the btc trend,” Ali notes.
The chart shows that the next major resistance ahead is between $46,300 and $47,600, while $38,600 and $39,900 carries the next major support below. “A break above the resistance can push btc towards $47,600, while a fall below the support could lead to a correction to $38,600,” explains the analyst.
btc Price
bitcoin is trading around the $42,700 mark as it continues its recent sideways movement.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/f9INY5TJ/" alt="bitcoin price chart” width=”1534″ height=”868″/>
Looks like the asset's price has been stuck in consolidation during the last few days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Charts from TradingView.com, IntoTheBlock.com
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