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Home Cryptocurrency news Bitcoin

Volume Precedes Price: Why an Unexpected Altcoin Crash Could Surprise Crypto Investors

Tony Spilotro by Tony Spilotro
12 months ago
in Bitcoin, Cryptocurrency news, Ethereum, Ripple
Reading Time: 2min read
Volume Precedes Price: Why an Unexpected Altcoin Crash Could Surprise Crypto Investors
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Top financial market analysts often live and die by the mantra that volume always precedes price, and the same is true for crypto assets like Bitcoin and the rest of the altcoin market.

An indicator designed to spot early changes in volume may be signaling that although altcoins are rallying across the greater crypto market, a surprising crash may soon catch crypto investors off guard.

Understanding On-Balance Volume: The Smart Money Indicator

The idea was primarily popularized by market analyst and author Joe Granville, in his 1970s book entitled New Strategy of Daily Stock Market Timing for Maximum Profit.

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In the best-selling book, Granville explained that assets don’t rise in price until demand exceeds supply and that demand is measured and volume – “thus volume must precede price.”

Related Reading | Altcoin Market Preparing Shocking Disbelief Rally According to Wall Street Cheat Sheet 

This was so important to Granville’s market analysis, he later developed a tool and technical analysis indicator called “On-Balance Volume.”

The indicator – often called the “smart money indicator” – is designed to spot early fluctuations in volume that can help predict price movements much sooner than with other indicators.

Some indicators are considered lagging indicators, such as the MACD, only providing signals after the fact. But the OBV indicator is a leading indicator that gives signals early.

It makes taking action on such signals riskier, however, the tool does work with chilling accuracy.

altcoin price chart market crypto

Click image for a full-size version.

Altcoin Market Could Be Signalling a Major Selloff Ahead as Whales Prepare to Dump

In the above chart of the total altcoin market cap, OBV can be seen rising ahead of the breakout of downtrend resistance, which suggests that “smart money” was taking a position before the breakout occurred.

The breakout on the OBV occurred in late December, resulting in an uptrend on the indicator. Later, in mid-January, price followed volume and broke through downtrend resistance.

And just as the saying goes, volume preceded the eventual price explosion that led the altcoin market to rally over 50% in less than 30 days.

However, that same tool may be now signaling that “smart money” – either high wealth whales or institutional investors – may be dumping altcoins on retail investors buying the breakout in anticipation of more upside.

Related Reading | Altcoin Market Following Early Bitcoin Path Could Lead to Life-Changing Wealth 

Instead, the OBV indicator may be signaling that the rally has ended, and distribution is taking place. OBV has foretold a deep drop may be ahead now that the indicator is in another downtrend, and shows a negative correlation with the largest FOMO candle on the altcoin chart.

If the early signal of the rally is any indication, the early signal that a selloff is about to surprise crypto investors cannot be ignored.

Tags: altcoinbitcoincryptoon balance volumevolume
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellent. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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