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Total Average Cost

Overview

Total Average Cost represents the aggregated cost basis of all token holders, reflecting the collective "investment cost" of the community holding the token. This fundamental metric provides insights into holder sentiment, potential price support levels, and overall token valuation.

Definition

Total Average Cost is calculated by determining the weighted average acquisition price of all tokens currently held in circulation, based on the market price at the time each token was transferred to its current holder.

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Significance

  • Valuation Benchmark: Represents the average price paid by current holders
  • Support Indicator: Often acts as a psychological price floor in the market
  • Market Sentiment: Reflects aggregate holder conviction and entry points
  • Transaction-Based Metric: Derived from actual on-chain activity rather than speculation

Calculation Method

The indicator accounts for various token acquisition methods: - Tokens purchased through decentralized exchanges (DEX) - Tokens received via transfers from other wallets - Tokens obtained through airdrops or other distribution mechanisms

Each acquisition is weighted by: 1. The quantity of tokens acquired 2. The market price at the time of acquisition

Interpretation

  • Price Above Total Average Cost: Indicates that the average holder is in profit
  • Price Near Total Average Cost: Often creates strong psychological support
  • Price Below Total Average Cost: Suggests the average holder is at a loss, potentially creating selling pressure
  • Rising Total Average Cost: Reflects healthy adoption with new buyers entering at higher prices

Analysis Applications

  • Support Level Identification: Provides a data-driven price support level
  • Risk Assessment: Helps evaluate current price relative to community investment
  • Stop-Loss Placement: Offers a reference point for setting strategic stop-losses
  • Market Cycle Positioning: Assists in determining overvalued or undervalued conditions

Considerations

  • Exchange wallets contain multiple users' tokens but are treated as single entities
  • Recent token migrations or contract upgrades may affect calculation accuracy
  • Doesn't account for tokens on centralized exchanges where on-chain transactions aren't visible
  • Heavily influenced by large holders (whales) due to weighting by token quantity

Parameters

This indicator uses the base parameters for time range and resolution settings.