Definition ∞ An on-chain supply cluster identifies a significant aggregation of a digital asset held by various addresses within a narrow price range, derived from historical transaction data on the blockchain. These clusters represent areas where a large volume of the asset was acquired, and holders may have a similar cost basis. Such concentrations can act as strong support or resistance levels, as many participants might choose to sell or hold at these price points. This metric offers insights into potential price barriers and market liquidity.
Context ∞ The discussion around an on-chain supply cluster often involves its utility in predicting future price movements and understanding investor behavior. A critical debate centers on the persistence of these clusters and their ability to withstand broader market pressures or significant trading volume. Observing an on-chain supply cluster provides valuable context for identifying key price levels where substantial buying or selling activity is likely to occur.
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