Point a channel to a folder with source instead of an archive?

The nix-channel --help doc says

       A channel URL should point to a directory containing the following files:

           A tarball containing Nix expressions and files referenced by them (such as build
           scripts and patches). At the top level, the tarball should contain a single
           directory. That directory must contain a file default.nix that serves as the
           channel’s “entry point”.

I tried pointing to a local folder that does not have an archive, but has the .nix files directly inside of it (f.e. default.nix), and got the error error: invalid channel URL.

Is this not supported? Can we not point nix-channel to a directory with source instead of a directory with an archive?