Market information platform IntoTheBlock highlighted what might need to happen before Dogecoin can continue its uptrend and reach new highs.
Dogecoin has notable on-chain resistance near $0.20
In a new job On X, IntoTheBlock discussed the recent DOGE price trend and what it would take for the memecoin to record a new high for the year.
According to the analytics firm, Dogecoin needs to solidly surpass the level where on-chain resistance is currently strongest. In on-chain analysisA level's potential to act as resistance or support is based on the number of coins last purchased there.
Below is a chart that shows the distribution of the investor cost basis for DOGE in price ranges close to the current spot value of the cryptocurrency.
The distribution of tokens based on where they were last transacted on the blockchain | Source: IntoTheBlock on X
Here, the size of the dot represents the number of coins acquired in the corresponding price range. Looking at upcoming levels, prices around $0.20 have been the cost basis for the highest number of tokens among the listed ranges.
To be more precise, around 32,000 addresses purchased 3.78 billion DOGE around this mark. Since this price is higher than the current spot value of the asset, all of these investors would be holding their securities at a loss.
Generally, the cost basis constitutes a particular level for investors and, as such, they are inclined to react when the asset is retested. Investors holding securities at a loss may tend to react to selling when such a reaction occurs.
Indeed, investors like these may fear that the cryptocurrency will fall again soon, so exiting at break-even does not seem like a bad idea, as they could at least avoid any losses in the future.
Of course, if only a few investors are involved, such a market reaction would not be relevant for the price of Dogecoin. However, if a large number of investors exhibit this reaction, the asset could very well experience visible fluctuations.
This is why the strength of an on-chain level to act as resistance or support lies in the number of coins acquired there. More coins mean a potentially bigger reaction once the level is retested.
Given that the $0.20 level forms the cost basis for a notable number of investors, it is possible that it constitutes a source of income. major resistance when Dogecoin retests it next. IntoTheBlock says that for DOGE to continue its recent trend, it would need to solidly breach this barrier.
DOGE Price
Dogecoin saw a decline over the past few days, which brought its price to $0.188.
Looks like the price of the memecoin has seen a plunge recently | Source: DOGEUSD on TradingView
Featured image by Kanchanara on Unsplash.com, IntoTheBlock.com, chart by TradingView.com
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