Cost Basis Cluster

Definition ∞ A cost basis cluster represents a grouping of Bitcoin or other digital assets acquired by a specific set of addresses within a narrow price range. This on-chain analytical tool helps identify significant price levels where a substantial amount of supply entered the market. It indicates the average acquisition price for a segment of holders. These clusters can act as areas of support or resistance.
Context ∞ Analyzing cost basis clusters offers valuable insight into the psychological and economic positioning of market participants. When the current price approaches a large cluster, it often suggests a potential area where holders might defend their positions or exit at breakeven. News related to Bitcoin price movements frequently references these on-chain metrics to explain market behavior.