A supply friction zone is a price range where significant selling pressure is anticipated due to a concentration of investor cost bases. This zone represents a price area where a large number of previously acquired digital assets are held at a loss or at break-even levels. As the price enters this range, holders who bought at these higher prices may be inclined to sell to minimize losses or recover their initial investment. This collective selling intent creates a region of increased supply, making it difficult for the price to move upward without substantial buying volume.
Context
Market analysts frequently identify supply friction zones using on-chain data, such as the Unspent Transaction Output (UTXO) realized price distribution. The existence of such zones is a critical consideration for price prediction, as they often act as overhead resistance. A key discussion involves how effectively market demand can overcome these zones, signaling a shift in market control and potential for a sustained rally.
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