In the world of cryptocurrency trading, we hear a lot about extreme volatility and sudden spikes and dips. However, what many people don’t talk about is an interesting phenomenon I’ve observed: point-based consolidation, where prices stick to certain levels and move within familiar ranges without going too far.

When following a trading pair over a short period of time, you may notice that the price tends to bounce at a certain point repeatedly, either up or down. Each time it reaches that point, it seems to pause for a moment, then return to its usual path. This phenomenon can be explained as “support and resistance levels.”

A support level is a point where the price finds support and has difficulty falling below it. This is usually due to increased demand at that point. On the other hand, a resistance level is a point where the price has difficulty rising above it, due to increased supply.

However, in the case of cryptocurrencies, these levels are not only fixed due to supply and demand, but traders’ psychology also plays a big role in their formation. When traders notice that the price repeatedly bounces at certain points, they start building their strategies around those levels, which enhances their strength and stability.

This movement shows that prices may adhere to certain patterns for several reasons:

1. Liquidity: Some cryptocurrencies may be less liquid than others, making their movement limited within narrow ranges.

2. Trading Strategies: Traders who rely on technical analysis may use support and resistance levels as a reference for entering or exiting trades, which leads to increased activity around those points.

3. Psychological factors: When price action is repeated at certain points, traders begin to see these points as natural “stops” for the price, increasing the frequency of movement around them.

Ultimately, what you’ve observed is not a coincidence, but rather a reflection of psychological and market factors interacting to form a somewhat predictable pattern. Traders can take advantage of these patterns by adopting specific strategies that exploit these critical points, whether it’s to enter trades or lock in profits.