On-chain data suggests that the upcoming Dogecoin levels may become a resistance wall based on the distribution of investors' cost basis.
A large amount of Dogecoin was last purchased at $0.36
In a new article by X, analyst Ali Martinez discusses the levels of Dogecoin, which appear particularly important in the UTXO Realized Price Distribution (URPD) of the memecoin. 'URPD' is an on-chain metric that tells us at which price level the asset's supply was last purchased. This metric determines the cost basis by examining the transaction history of each token to understand its latest transfer price.
Below is the chart shared by the analyst, showing the latest URPD data for Dogecoin:
As shown in the figure above, there is no price level near the current price of Dogecoin that can support a substantial portion of the supply's break-even point. The closest level in the URPD is around $0.21, corresponding to the purchase point of 7.5% of the Dogecoin supply. In terms of upward direction, a significant cost basis center does not appear until $0.36, where investors last purchased about 3.8% of the existing tokens.
So, what do these levels have to do with Dogecoin? To find the answer to this question, it is first necessary to understand investor psychology. For any holder, their cost basis is naturally an important level, so when the price tests that level again, they are likely to react in some way.
Regardless of how this reaction manifests, if only a few investors exhibit this response, it may not mean much for the cryptocurrency. However, re-testing levels that encompass a large number of holders' cost bases may be different. From this perspective, the levels mentioned above could be significant.
In general, if the price re-tests from above, and market sentiment is bullish, investors tend to buy. This is because holders who have already made a profit before the re-test may see a price drop as a 'buy the dip' opportunity.
On the other hand, holders who were in a losing position before the re-test may decide to sell their Dogecoin, as they might worry that this could be their last chance to exit at break-even for some time.
Thus, the main supply barrier below the spot price of Dogecoin may become a potential support level, while the supply barrier above may become a resistance level. Given that the two closest supply barriers for Dogecoin are currently $0.21 and $0.36, these two levels may be where the cryptocurrency is most likely to encounter strong support and resistance.
DOGE Price
At the time of writing, the price of Dogecoin is approximately $0.237, having risen more than 37% in the past seven days.
