technical indicator</strong></strong></a> that predicts the fluctuations of an asset's price using volume flow. It is a compounding indicator that measures purchasing and selling pressure by adding <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-volume/">volume on up days and subtracting volume on down days.</p>\n<p>When an asset's price closes higher than the previous close, the full day's volume is referred to as up-volume. However, when the asset's price ends lower than its prior close, the volume is called <strong>down-volume</strong>.</p>\n<p>Note that OBV only generates volume on markets that have exchange volume, just like other volume-based indicators like <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-money-flow-index-mfi/">MFI, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-negative-volume-index-nvi/">NVI, the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-klinger-oscillator/">Klinger oscillator</strong></strong></a>, and so on.</p>\n<p>OBV metric was founded by Joseph Granville. He argues that volume determines how financial markets operate, and that price changes are mostly determined by it. If the <strong>market volume of an asset increases</strong> dramatically, he believes that the price is about to see a large spike (upwards or downwards).</p>\n<p>The OBV can be determined based on the closing price:</p>\n<ul>\n<li>OBV = Previous OBV - Current Day&rsquo;s Volume &ndash; <em>when the closing price for the past 24 hours is lower than the previous closure price.</em></li>\n<li>OBV = Previous OBV &ndash; <em>when the closing price for the past 24 hours is equal to the previous closing price.</em></li>\n<li><strong>OBV = Current Day&rsquo;s Volume + Previous OBV</strong> &ndash; <em>when the closing price for the past 24 hours is above the previous closing price.</em></li>\n</ul>\n<p>Though note that the absolute OBV is not important because the OBV line will determine the market trends.</p>\n<p>Here are the steps of using the OBV to determine asset&rsquo;s price fluctuations:</p>\n<ul>\n<li>Define the trend for OBV.</li>\n<li>Check whether the <strong>present trend</strong> is in line with the underlying asset's trend.</li>\n<li>Find and mark the levels of support and resistance.</li>\n<li>When the OBV lines you've made break through their resistance levels, <strong>accurate signals</strong> that indicate whether the asset&rsquo;s price is moving upwards or downwards.</li>\n</ul>\n<p>Note that closing prices are important to consider when searching for resistance breaks. Besides, keep in mind that due to large volume spikes, the OBV indicator can become ineffective for a period of time. If this happens, you should <strong>wait for the end of the settling period</strong> (the time between the trades when an order is being processed).</p>\n<p>Furthermore, divergence signals can predict a trend reversal in either a bullish or bearish direction. They are predicated on the principle that <strong>volume always takes precedence over price</strong>. As a result, a bearish divergence is established when OBV falls or closes lower than its prior low. On the other hand, a bullish divergence occurs when OBV increases and closes at a higher price than the prior close.</p>\n<p>However, it's vital to remember that <strong>OBV alone isn't sufficient for accurately predicting bearish and bullish trends</strong>. 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Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"nextSection":{"id":564,"original_id":null,"author_id":41,"translator_id":null,"title":"What is Off-Chain Transaction?","slug":"what-is-off-chain-transaction","section":"O","keyword":"Off-Chain Transaction","status":"published","definition":"a transaction that occurs outside of the main blockchain.","content":"<p>An <strong>off-chain transaction</strong> occurs outside of the main <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain. Off-chain transactions were developed as a solution to the issues related to on-chain transactions &ndash; financial operations that occur when cryptocurrency tokens are transferred within the native blockchain network.</p>\n<p>Although cryptocurrencies like <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum (ETH)</strong></a>, Solana (SOL), and <strong>Dogecoin (DOGE)</strong> offer unique functionalities and differ from each other, they are all based on the core principles of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralization that <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin (BTC)</strong></a> was developed with.</p>\n<p>A decentralized blockchain network allows users to conduct financial transactions using <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">network nodes</strong></a> that verify the transactions inside the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-distributed-ledger/">distributed ledger</strong></strong></a>. Cryptocurrency can be transferred via the network anywhere in the world, regardless of the locations of the sender and receiver.</p>\n<p>Off-chain transactions were created to solve some of the issues that blockchain transactions encounter. They serve as a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-second-layer-solutions/">second-layer solution</strong></a> that moves the transaction outside the main blockchain. Second-layer protocols make the transaction process cheaper and faster.</p>\n<p>The second layer encompasses projects and <strong>protocols</strong> built on top of the base blockchain. These projects are designed to improve the overall blockchain technology and user experience. Their goal is to expand blockchain functionality beyond its initial build.</p>\n<p>Off-chain transactions are frequently used for debt agreements. Both parties must have <strong>mutual confidence</strong> that they owe each other a predetermined amount of cryptocurrency, making the transaction legitimate.</p>\n<p>The transaction stays completely outside of the main blockchain network and occurs instantaneously. Users can then repay the remaining debt using a single on-chain transaction. They can create a channel for <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-private-key-secret-key/">private key</strong></a> exchange for the wallets involved in the off-chain transaction.</p>\n<p>As long as the <strong>channel remains open</strong>, users can swap cryptocurrency until a settlement is reached. The parties involved in the operation can then stop the channel and perform an on-chain operation to record the final transaction value.</p>\n<p>Some of the best-known off-chain protocols are the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-lightning-network/">Lightning Network</strong></a> and <strong>Liquid Network</strong>.</p>\n<p>There are numerous advantages to performing an off-chain transaction, including:</p>\n<ul>\n<li>Off-chain transactions help resolve the scalability issues of blockchain technology;</li>\n<li>The transactions are executed significantly <strong>faster</strong> than on-chain which requires more time to be confirmed due to network congestion;</li>\n<li>Until the transaction is added to the blockchain, the parties may not be required to pay any fees;</li>\n<li>Parties conducting an off-chain transaction can remain anonymous as the transaction data is not recorded on the main blockchain and, therefore, isn&rsquo;t publicly available.</li>\n</ul>","level":"medium","meta_title":"What is Off-Chain Transaction? Definition & Meaning | Crypto Wiki","meta_description":"Off-Chain Transaction meaning: Off-Chain Transaction - a transaction that occurs outside of the main blockchain.","meta_keywords":null,"language":"en","created_at":"2022-03-24T07:48:43.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-off-chain-transaction"},"prevSection":{"id":558,"original_id":null,"author_id":43,"translator_id":null,"title":"What is Off-Chain Governance?","slug":"what-is-off-chain-governance","section":"O","keyword":"Off-Chain Governance","status":"published","definition":"is a blockchain governance model that allows every stakeholder to have a say in public blockchains' decision-making via collaboration.","content":"<p>When an <strong>Off-Chain Governance</strong> is established, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-public-blockchain/">public blockchain</strong></a> stakeholders challenge one another for control by trying to persuade the majority to join and promote their cause. Thus it has similarities with how politics work in real life. Stakeholders promote their interests via collaboration platforms like social media and forums, or during events, conferences, and other gatherings.</p>\n<p>Off-chain governance network tries to consider everyone&rsquo;s interests, but the power of decision-making mostly fluctuates between the core development team members and miners.</p>\n<p>The most popular blockchain platforms like <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin or <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum use their own off-chain governance variation. For example, Bitcoin users don&rsquo;t receive any inherent voting rights just by owning BTC since Bitcoin hasn&rsquo;t introduced an on-chain governance network or governance tokens. The possession of BTC can only do so much, such as make your voice heard in off-chain conversations.</p>\n<p>Moreover, it doesn&rsquo;t matter how many blocks a Bitcoin miner has verified, that mining power does not translate to governance power. It&rsquo;s important to note that no matter what hash rate percentage you reach when mining, you won&rsquo;t be rewarded with governance rights. Your responsibility for verifying and adding transactions to the blockchain always stays the same just like the type of rewards you receive.</p>\n<p>Before any major changes are implemented within Bitcoin or Ethereum, the proposal is discussed by the crucial members of the platform. They include the members of the core development team, miners, researchers, and end-users. In addition, Bitcoin allows anyone to attend its core development team&rsquo;s online meetings.</p>\n<p>Ethereum also governs its platform in a similar fashion as Bitcoin. <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></strong></a> who is often considered the crypto hero is in charge of the core development team of Ethereum.&nbsp;</p>\n<p>The process of making important decisions off-chain starts much as it does <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-on-chain/">on-chain. &nbsp;The core development team brings forward a formal proposal for implementing new code like <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-bitcoin-improvement-proposal-bip/">Bitcoin improvement proposal (BIP)</strong></a> or <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-ethereum-improvement-proposal-eip/">Ethereum improvement proposal (EIP)</strong></a> which basically are improvement suggestions. In the latter cases, they&rsquo;re held in the project&rsquo;s official repository on Microsoft or GitHub.</p>\n<p>Then stakeholders come together to discuss the proposal and express their approval or disapproval of it. It&rsquo;s much like <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-game-theory/">game theory</strong></a>.&nbsp;</p>\n<p>Node operators, also known as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">validators, and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-miner/">miners are consulted to find out whether they approve of upgrading the software. If everyone approves, then the code is implemented without a hassle. Although it almost never goes that smoothly.&nbsp;</p>\n<p>Each major update is announced in advance in order to keep the developers and stakeholders on the same page.</p>\n<p>Now, in case of disagreement between stakeholders, there are two possible courses of action:</p>\n<ul>\n<li>Try to change the opinion of stakeholders by using&nbsp;persuasion techniques to bring the other stakeholders around;</li>\n<li>Don&rsquo;t try to change the stakeholders' opinions. Instead, enforce the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-hard-fork-blockchain/">hard fork</strong></a> protocol. This way they&rsquo;re able to make relevant and agreed-upon changes.</li>\n</ul>","level":"medium","meta_title":"What is Off-Chain Governance? Definition & Meaning | Crypto Wiki","meta_description":"Off-Chain Governance meaning: Off-Chain Governance - is a blockchain governance model that allows every stakeholder to have a say in public blockchains' decision-making via collaboration.","meta_keywords":null,"language":"en","created_at":"2022-03-23T15:37:14.000000Z","updated_at":"2023-05-16T11:30:35.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-off-chain-governance"},"currentChapter":"O","currentSection":"what-is-on-balance-volume-obv","chapterTitle":"O","readingLevel":"medium"},"url":"/crypto/learn/crypto-terms/what-is-on-balance-volume-obv","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">
Crypto Terms: Letter O

What is On-Balance Volume (OBV)?

On-Balance Volume (OBV) MEANING:
On-Balance Volume (OBV) - a technical indicator that uses volume flow to predict an asset's price fluctuations.
Medium
2 minutes

Let's find out On-Balance Volume (OBV) meaning, definition in crypto, what is On-Balance Volume (OBV), and all other detailed facts.

On-Balance Volume (OBV) is a technical indicator that predicts the fluctuations of an asset's price using volume flow. It is a compounding indicator that measures purchasing and selling pressure by adding volume on up days and subtracting volume on down days.

When an asset's price closes higher than the previous close, the full day's volume is referred to as up-volume. However, when the asset's price ends lower than its prior close, the volume is called down-volume.

Note that OBV only generates volume on markets that have exchange volume, just like other volume-based indicators like MFI, NVI, the Klinger oscillator, and so on.

OBV metric was founded by Joseph Granville. He argues that volume determines how financial markets operate, and that price changes are mostly determined by it. If the market volume of an asset increases dramatically, he believes that the price is about to see a large spike (upwards or downwards).

The OBV can be determined based on the closing price:

  • OBV = Previous OBV - Current Day’s Volume – when the closing price for the past 24 hours is lower than the previous closure price.
  • OBV = Previous OBV – when the closing price for the past 24 hours is equal to the previous closing price.
  • OBV = Current Day’s Volume + Previous OBVwhen the closing price for the past 24 hours is above the previous closing price.

Though note that the absolute OBV is not important because the OBV line will determine the market trends.

Here are the steps of using the OBV to determine asset’s price fluctuations:

  • Define the trend for OBV.
  • Check whether the present trend is in line with the underlying asset's trend.
  • Find and mark the levels of support and resistance.
  • When the OBV lines you've made break through their resistance levels, accurate signals that indicate whether the asset’s price is moving upwards or downwards.

Note that closing prices are important to consider when searching for resistance breaks. Besides, keep in mind that due to large volume spikes, the OBV indicator can become ineffective for a period of time. If this happens, you should wait for the end of the settling period (the time between the trades when an order is being processed).

Furthermore, divergence signals can predict a trend reversal in either a bullish or bearish direction. They are predicated on the principle that volume always takes precedence over price. As a result, a bearish divergence is established when OBV falls or closes lower than its prior low. On the other hand, a bullish divergence occurs when OBV increases and closes at a higher price than the prior close.

However, it's vital to remember that OBV alone isn't sufficient for accurately predicting bearish and bullish trends. For this type of research, additional technical indicators like MACD or RS should be used.