Key cost basis failure occurs when the market price of an asset drops below the average price at which a significant group of investors acquired it. This term describes a market event where the current trading price of a digital asset falls beneath the aggregate average purchase price of a substantial cohort of holders. When such a failure occurs, a significant portion of the market enters an unrealized loss position, potentially triggering further selling pressure as these investors seek to minimize losses. This metric is often derived from on-chain analysis, tracking the movement of coins and their last transaction prices.
Context
Key cost basis failure is a critical indicator used by on-chain analysts to identify potential support and resistance levels and predict market bottoms or capitulation events. News articles often highlight these failures as moments of extreme market stress or as signals that a price recovery may be distant. Monitoring these levels helps assess the psychological and financial thresholds of various investor groups.
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