The price of Bitcoin has been on an upward trend recently, climbing above $35,000 at times. However, the on-balance volume (OBV) for Bitcoin has been declining even as the price rises. This divergence between price and OBV often signals a potential change in the trend ahead.
As cryptocurrency analyst Nebraskangooner pointed out on Twitter, the current OBV decline is not yet a major concern for Bitcoin’s price, but it is worth monitoring. OBV measures the positive and negative cumulative volume flow into an asset, acting as a momentum indicator. A rising OBV confirms the current price trend, while a falling OBV during a price rise shows waning momentum and a potential trend reversal ahead.
For now, Bitcoin is still holding support at around $34,600, according to Nebraskangooner. As long as Bitcoin maintains this support level, the OBV decline may not lead to a significant pullback. However, losing the $34,600 support could open the door to a drop below $33,000 for Bitcoin.
Technical analysts will be closely watching to see if Bitcoin’s OBV can stabilize and start trending higher again. That would indicate renewed upside momentum for Bitcoin’s price. But if OBV continues to deteriorate, it may only be a matter of time before Bitcoin’s price starts to follow suit and break down from its recent highs. The divergence between price and OBV often resolves in the direction of the OBV trend.
For cryptocurrency investors and traders, it will be important to monitor both the price levels and volume-based indicators like OBV. Paying attention to OBV can provide an early warning on potential trend changes to help inform investment decisions. As Bitcoin shows conflicting signals between rising prices and falling OBV, caution and vigilance are warranted in the days ahead.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.