Using on-chain data insights to understand the token trend: Interpretation of the combined OI and CVD indicator strategy

Why Focus on OI and CVD Indicators?

In the crypto market, many traders dream of identifying a small coin before it explodes. Many well-known analysts provide predictions online, but few disclose their specific methodologies. Today, let’s approach this from a different angle by analyzing the on-chain data indicator system.

When researching low market cap tokens, OI (Open Interest) and CVD (Cumulative Volume Delta) are particularly worth paying attention to. They can reflect the true intentions of market participants earlier than price action.

Understanding the Core Meanings of OI and CVD

What is OI? It represents the total number of open leveraged contracts in the market. An increase in OI indicates more funds entering to open positions, while a decrease suggests funds are exiting or closing positions. Simply put, OI is a barometer of market participation enthusiasm.

What is CVD? It calculates the difference between buy and sell transaction volumes (Buy Volume - Sell Volume). Note that this accumulation is based on the direction of transactions, not price accumulation. In trending markets, CVD will show a sustained positive or negative trend; in consolidating markets, it will oscillate around zero.

Four Combination Signals of OI and CVD

These two indicators need to be used together to be effective. Here are four scenarios:

Scenario 1: OI↑ + CVD↑ — Bullish accumulation signal, indicating more buyers are opening leveraged positions, and the market may continue to rise.

Scenario 2: OI↑ + CVD↓ — Bearish accumulation signal, indicating selling pressure is increasing, and a pullback may be imminent.

Scenario 3: OI↓ + CVD↓ — Bullish stop-loss signal, indicating buyers are closing positions, and bears are gaining control.

Scenario 4: OI↓ + CVD↑ — Bearish closing signal, indicating sellers are exiting, and the bullish momentum is temporarily taking a breather.

Practical Application: Taking Velo Data as an Example

To apply this method, you need to operate on data platforms like Velo Data. First, go to the market page, select the market cap segment (large-cap, mid-cap, small-cap, etc.) from the dropdown menu, and choose a time cycle (1 hour or 4 hours).

When looking for small market cap tokens, select the “Small Caps” option and narrow the timeframe to capture more volatile targets.

Next, switch to the “OI Change” chart at the bottom of the graph, which is calculated based on the difference in OI between adjacent time points. When this value is positive, it indicates buying strength is accumulating; when negative, selling is dominant. The chart uses colors to distinguish positive and negative values, making trends clear at a glance.

Then, observe the “OI-Normalized CVD” chart. This indicator clearly shows who is more active in the leveraged market—bulls or bears. If bulls are strong, the token may face upward pressure.

Case Study: Interpreting Signals from ARPA

For example, if you observe that ARPA’s OI is rising and CVD is also trending higher, this forms a basic hypothesis: in the short term, ARPA’s price may gently rise.

However, an important premise is—if the CVD curve remains below zero, it indicates that despite bullish efforts, sellers still dominate. In this case, the upward movement may not be sustainable unless bulls can continuously break resistance levels.

If you are a short-term trader, be sure to set take-profit and stop-loss orders, as these indicators are only reference tools based on historical data; the real market always has uncertainties.

Other Methods to Enhance Analysis

To improve trading success rates, consider combining OI and CVD with traditional technical indicators like EMA for multi-dimensional analysis. This can reduce the risk of misleading signals from any single indicator and help you make more rational decisions.

Important Risk Reminder

The above content only represents analytical perspectives and personal opinions, intended for academic discussion and knowledge exchange. It does not constitute any investment advice. Cryptocurrency markets are highly risky; please trade rationally, enhance risk awareness, and comply with relevant laws and regulations in your country or region.