Current market data indicates that Bitcoin’s price is navigating between significant price levels where substantial numbers of investors previously made their purchases.
Bitcoin’s Price Action Caught Between Key Investor Cost Basis Zones
Analyst Ali Martinez recently shared insights on X, identifying crucial support and resistance levels for Bitcoin based on on-chain analysis. These levels are determined by the average purchase price, or “cost basis,” of various investor groups.
The logic behind this approach is that investors tend to react strongly when the price revisits their break-even point. The nature of this reaction, whether buying or selling, depends on factors like the direction from which the price approaches that level and the prevailing market sentiment.
Generally, if the price rebounds from above and retests a previous acquisition level, investors who were previously in profit might increase their holdings. Their rationale is the belief that the same price point will likely yield profits in the future.
Conversely, investors who were underwater prior to the price retesting their cost basis might choose to liquidate their holdings, fearing further price declines.
Minor buying or selling activity from a small number of investors typically has minimal impact on Bitcoin’s price. However, when the price tests a narrow range representing the cost basis for a large segment of holders, the effect can be significant.
Below is a chart shared by the analyst illustrating the distribution of holder cost bases around Bitcoin’s current price:
The chart shows that Bitcoin’s recent rally broke through a substantial resistance zone. This zone, spanning $93,700 to $96,600, represents the average purchase price for 2.13 million addresses, holding a total of 1.39 million BTC.
Bitcoin is now approaching the $96,900 to $98,700 range, where investors hold 750,800 BTC. Because these holders are currently at a loss, Bitcoin may face resistance in breaking through this area.
The fact that the larger $93,700 to $96,600 range has now transitioned to a support level is a potentially positive indicator. This could provide a buffer for Bitcoin if it struggles to surpass the current resistance, offering a landing zone after rejections.
However, if this support fails, the next significant support zone lies much lower, between $82,000 and $85,000. It remains to be seen whether buying pressure will be sufficient to sustain Bitcoin’s price recovery.
Bitcoin Price Update
As of this writing, Bitcoin is trading around $96,800, reflecting a gain of over 2% in the past week.