All Clear For $40,000? Bitcoin Shows Little On-Chain Resistance Ahead

October 24, 2023

Bitcoin might have an easy path toward the $40,000 mark as on-chain data suggests there isn’t much resistance ahead.

Bitcoin Levels Ahead Are Thin With Addresses Right Now

According to data from the market intelligence platform IntoTheBlock, there isn’t any exceptionally large resistance ahead for BTC. In on-chain analysis, resistance and support levels are defined on the basis of whether a large number of investors have bought their coins at the price levels or not.

The reason behind this is that the holders often show some reaction to the spot price retesting their cost basis (that is, their acquisition price). Whether they react by selling or buying could depend on which side the price is retesting their cost basis from.

When the spot value retests an investor’s cost basis from below, that is, when said investor had been in loss previously, the holder may react by selling their coins. This is because they might fear that Bitcoin would go down again, so exiting at break-even would sound like the ideal option.

On the other hand, the opposite type of retest may lead to the investor accumulating more, as they may think that since these same price levels turned out to be profitable earlier, they would do so again in the future.

Such buying and selling are insignificant on smaller scales, but if a large number of investors have their cost basis inside a particular price range, then the range could act as support or resistance for the asset.

Now, here is a chart that shows how the different Bitcoin price ranges look like on the basis of the concentration of investors who bought at them:

As displayed above, the price ranges after the current one doesn’t host the cost basis of that many investors. This implies that these prices shouldn’t offer too much resistance to the cryptocurrency, should a retest of them happen.

The range that’s thickest with investors currently is the one above $38,200, meaning that it would potentially be the trickiest to clear on the way to $40,000. This range, too, however, isn’t that much in terms of investor concentration when compared to the price levels Bitcoin has already cleared.

From the graph, it’s visible that the levels under $31,000 are especially rich with addresses. Thus, if the cryptocurrency observes a retrace towards them, it should potentially find some strong support.

IntoTheBlock also notes that with the latest rally, about 80% of the investors have now come into a state of profit, which is the highest level that the metric has seen since the bull market peak back in 2021.

It now remains to be seen if Bitcoin can keep up this rally and build up towards the $40,000 level, as at least on-chain data suggests such a move shouldn’t be too hard.