On-Balance Volume (OBV)
Web3 / technical analysis
On-Balance Volume is a volume-based indicator that measures the cumulative relationship between trading volume and price movements in cryptocurrency markets, accumulating volume on up days and subtracting it on down days to create a running total. OBV operates on the premise that volume precedes price movement, meaning unusually high volume accompanying price changes suggests the move has strength and conviction behind it. Traders analyze OBV trends and divergences—situations where price trends upward while OBV trends downward, or vice versa—to confirm trend strength or anticipate potential reversals. Example: In November 2021, Cardano showed divergence when its price approached all-time highs but OBV failed to make corresponding highs, correctly signaling that the bull run was losing momentum before the subsequent price correction. Why it matters for crypto technical analysis: OBV incorporates volume data often overlooked by price-only indicators, helping traders distinguish between high-conviction price moves and weakly supported rallies in crypto markets where volume can be fragmented across multiple exchanges.
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