Dogecoin has observed a plummet of 11% over the past week, but this decline may not continue further, as DOGE is now just above a major on-chain support block.
Dogecoin Is Now Just Above A Major On-Chain Demand Zone
According to data from the market intelligence platform IntoTheBlock, DOGE is currently above a zone of significant on-chain demand. In on-chain analysis, “demand zones” refer to price ranges in which many investors buy their coins.
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These zones are determined using blockchain data; the average price at which an address receives deposits is considered its cost basis. Below is a chart showing how the Dogecoin price levels near the current one are based on how many addresses share their cost basis with them.
In the graph, the size of the dots corresponds to the number of addresses that acquired their coins within the respective range. It would appear that the $0.096 to $0.139 range currently looks to be the largest Dogecoin price range in terms of this metric.
More specifically, 409,330 addresses acquired a total of 45 billion DOGE inside this range. Now, what’s the relevance of this demand zone, or any other one, for that matter?
Generally, the cost basis is an important level for any investor, so they may be more prone to show some reaction when the spot price of the cryptocurrency retests it.
A few investors showing this reaction would naturally not be relevant for the broader market. Still, if many of them share their cost basis inside the same narrow range, then a retest could produce a large reaction for the price to feel its effects.
The demand zone around the average price of $0.115 had many addresses acquire their coins there, so its retest could be significant for the memecoin.
As the current Dogecoin price is above this range, these investors who bought inside the range would be sitting on some profits. Historically, such demand zones below the price have acted as points of support for the cryptocurrency.
This is because investor psychology tends to work out, so these holders who were in profits before the retest may believe the price would go up again so they could decide to buy more of the asset.
On the other hand, investors in the red before the retest can fuel the cryptocurrency’s resistance as they sell in fear that the price will fall again. “On the upside, DOGE may face resistance around the $0.16 level, where 20 billion DOGE is presently held at a loss,” notes IntoTheBlock.
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It remains to be seen whether the on-chain demand zone below would help stop the memecoin’s decline if its price drops enough to retest it.
DOGE Price
The past week has been a bad time for Dogecoin investors as the asset’s price has crashed around 11%. Following this drawdown, DOGE is now trading around $0.142.
Featured image from iStock.com, IntoTheBlock.com, chart from TradingView.com