Bitcoin’s recent rise to $83,500 prompts the question of how traders can determine if support is strengthening. Glassnode’s proximity-weighted cost-basis framework focuses on the supply closest to the trading price to assess this.
CryptoSlate’s data on the Bitcoin market showed a price of around $83,500, reflecting a 2.8% increase over 24 hours as of 09:44 UTC on Oct. 21. Glassnode’s explanation of the proximity-weighted cost basis concept, detailed in a post by Fountainhead Digital co-founder Vicky Yang on Oct. 20, provides a method to analyze the nearby inventory. This framework serves as a gauge for the recovery leading up to the Federal Reserve meeting on Oct. 27–28, assessing if the proximity of supply improves as buyers absorb it.
An earlier report from Glassnode on Oct. 19 indicated that 68.2% of Bitcoin supply was profitable, despite weak spot buying activity during that period. This highlights how profitability can coexist with low demand, underscoring the importance of understanding the distribution of cost bases around the trading price.
The proximity-weighted approach segments the cost-basis distribution into quantiles and assigns weights based on their distance from the spot price. These weights diminish exponentially as the distance increases, with adjustments made according to the 30-day rolling standard deviation of the price. This results in a weighted realized-price reference that accentuates cost bases closer to the trading range.
Glassnode’s Proximity Support Index assesses the portion of proximity-weighted supply below the spot price, while the Resistance Index covers the share at or above it. A support share exceeding fifty percent indicates a dominance of support within the model’s distribution.
As Bitcoin hovers around $83,000, the upcoming FOMC meeting scheduled for Oct. 27–28 could impact demand dynamics, potentially altering the ability to absorb nearby supply. Expectations regarding interest rates and policy decisions can influence market conditions, affecting the balance between supply and demand.
In conclusion, monitoring the proximity of supply to the trading price, alongside buyer behavior and external factors like Federal Reserve decisions, can provide insights into the strength of support and resistance levels in the Bitcoin market.
