Support Level Definition
The support level, in the context of cryptocurrency and blockchain, refers to the price point at which a cryptocurrency is thought to be unable to fall below due to a strong demand or buying interest that surfaces at that level. Basically, it’s a barrier that prevents the price of an asset from going lower.
Support Level Key Points
- Support level is a value that the price of a cryptocurrency has difficulties to fall below.
- This concept is rooted in the supply and demand theory.
- It’s a critical component to consider in technical analysis.
- Repeated approach to the support level marks it as a stronger barrier.
What is a Support Level?
A support level is a concept from technical analysis, utilized by traders and investors within cryptocurrency markets, among others. It is a level where a cryptocurrency’s price has difficulty falling below because enough traders or investors believe it to be a good value, and buy into the asset, thereby propping up its price.
When does a Support Level occur?
A support level is often established when a cryptocurrency’s price falls and then rebounds at a particular level, reflecting a point at which majority of investors felt comfortable buying the asset. The more often the price approaches the support level, the stronger the support level is deemed to be.
Why is a Support Level important?
The significance of a support level lies in its role in decision-making for traders and investors alike. It provides an indication of when a cryptocurrency may be oversold and may rebound, offering a potentially opportune moment to buy. Conversely, if a price falls below its support level, it may indicate that sentiment around the asset has changed and it could be time to sell.
How is a Support Level established?
Establishment of a support level depends on the traders’ collective psychology. When a price level is perceived to be a good relative value for the cryptocurrency, buying usually increases which stabilizes and potentially increases the price – creating a support level.
Who uses the concept of Support Level?
The concept of support level is not exclusive to any single group. Traders, investors, and even cryptocurrency enthusiasts make use of this concept to understand how a classic supply and demand scenario is playing out in the cryptocurrency market. It helps them in predicting future price movements based on past behavior.
Where can you find the Support Level?
Support levels can be identified by studying a cryptocurrency’s price chart. It’s the point or range at which the cryptocurrency’s price stops declining, at least temporarily, due to higher demand.
