Bitcoin Price and On Balance Volume (OBV)

BITSTAMP:BTCUSD   Bitcoin / Dollar
While it is well and good to create charts, monitor indicators and attempt to discern the direction of the Bitcoin price, it is easy to get buried in complexity and blinded by bias. That is why the On Balance Volume (OBV) is so valuable.

You can read more about it by following the link below:


Essentially OBV allows you to eliminate a lot of the noise from day to day volume movement and get a clear idea which direction it is headed in. Price and volume are highly correlated as you can see by looking at the chart.

On the OBV, I have added a horizontal black line where OBV has clearly pivoted recently. OBV isn't going to help much in determining price so much as price momentum. Prices below the horizontal line tend to be lower (but aren't always) than the prices below the line. This is relative. For instance, you shouldn't apply this months back. You use it to look at more recent price action not to compare today to several months ago.

You'll notice that OBV is below the horizontal line and has not moved dramatically lower. This helps explain the recent flat Bitcoin price.

The OBV should also help - in conjunction with other patterns and indicators - when to buy or sell Bitcoin . For instance, it may not be a great time to go long Bitcoin since the direction of price isn't clear. Should the volume continue to decline, then price will likely decline with it.

"Should the volume continue to decline, then price will likely decline with it."
I agree. I created yesterday some long-term charts using volume indicators:

Volume Oscillator


Weis Wave Volume


Volume Price Confirmation


You can find more here:
The real reason Bitcoin is doomed in Summer 2014

P.S. There are several versions of the OBV, I will test which one is the best.
TerryKinder ChartArt
I think OBV is a very elegant indicator and conveys the volume momentum (which price follows) in a visually easy to understand manner.
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