Cost Basis Distribution

Cost basis distribution is the analysis of the price levels at which various cohorts of market participants acquired their holdings. By mapping out where the majority of the supply was purchased, analysts can identify significant support and resistance levels based on holder psychology.

For example, if a large volume of supply was acquired at a specific price, that level will likely act as strong support, as holders are less likely to sell at a loss. Conversely, if the price drops below that level, it can create intense selling pressure as those holders look to exit at breakeven.

This distribution is a critical component of understanding market structure and risk. It helps investors identify "on-chain congestion zones" where price action is likely to be volatile.

By visualizing the cost basis, one can better anticipate how the market will react to future price movements.