OI Indicator and CVD Analysis: How to Identify Promising Altcoins Through Position Data

Many traders aim to identify altcoins with growth potential before they become popular. However, most analysts online do not disclose their specific research methods. Unlike them, we do not rely on project support, so we are ready to share practical knowledge about the crypto sphere. Today, we will discuss a specific technique: how to use OI and CVD to identify altcoins that may show significant growth. Studying these indicators is especially valuable for researching low-cap projects, where these signals are most clearly manifested.

Understanding the basics: what are OI and CVD

Before moving to practice, it’s important to clearly understand how these two indicators work.

Open Interest (OI) is a metric that reflects the total number of open derivative contracts in the market. When OI increases, it means new capital is flowing into derivatives markets, and positions are expanding. When OI decreases, traders are closing their positions, signaling capital outflow. This indicator serves as a market activity barometer and shows how intense the trading is.

CVD (Cumulative Volume Delta) is the difference between accumulated buy and sell volume. It helps determine who controls the market: buyers or sellers. It’s important to understand that CVD is based on the accumulation of directed trading volume, not price movements. In trending markets, CVD shows clear positive or negative values, while in unstable markets it fluctuates around zero.

How OI and CVD work together: four key scenarios

The true power of these indicators is revealed when you analyze them simultaneously. There are four main combinations indicating different market dynamics:

Scenario 1: OI increases + CVD increases — this means long positions are opening massively. Buyers are entering the market confidently, and capital is concentrating on the bullish trend side.

Scenario 2: OI increases + CVD decreases — shorter positions are growing, and sellers are intensifying pressure. This signals that the market is entering a phase of competition between bullish and bearish forces.

Scenario 3: OI decreases + CVD decreases — long positions are being liquidated. Buyers are fleeing the market, leaving short positions unopposed.

Scenario 4: OI decreases + CVD increases — short positions are closing. Sellers are taking profits or exiting positions, often preceding a decisive upward move.

It’s important to remember: these signals work best in volatile markets. In calm, non-trending markets, they have little informational value.

Practical scheme: how to find potential altcoins using Velo Data

Now let’s move to specific application of this knowledge. The most popular tool for such analysis is the Velo Data platform, which aggregates derivatives position data.

Step one: choose the right asset category

Go to the Market page. In the top menu, you will find filters by market capitalization: Large Caps, Mid Caps, Small Caps, etc. To find promising altcoins with significant volatility potential, select Small Caps. Also, set a compact time frame (1H or 4H) for more sensitive reaction to changes.

Step two: analyze the OI change chart

On the page, select the indicator “Open Interest Change” (OI Change). This parameter shows the difference in the number of open contracts compared to previous time points. When the value is positive, it indicates strengthening bullish activity. When negative — short positions dominate.

Note: a positive OI change is only the first filter. It indicates a potential upward trend but does not guarantee it. That’s why subsequent steps are critically important.

Step three: validate via OI-Normalized CVD

On the same page, launch the “OI-Normalized CVD” chart — this is a normalized CVD graph in the context of open interest levels. This indicator shows who (buyers or sellers) is behaving most aggressively at the moment.

If you find a token with a positive OI change, and its normalized CVD is also trending upward, this indicates synchronized activity: buyers are not only numerically dominant but are also continuously increasing their positions. This significantly increases the likelihood of further price growth.

Examples from real practice

Analysis of RLC: when signals do not align

Let’s consider the token RLC on the chart. Suppose you notice its OI is increasing. However, when checking the OI-Normalized CVD, you see the CVD curve is falling. What does this mean?

According to the second scenario from our list, this signals the opening of short positions. More money is entering the market (OI is rising), but it is directed toward selling (CVD is falling). This is a mixed signal indicating a possible correction. In such a case, it’s better to consider other tokens.

Analysis of ARPA: convergent signals

Contrasting this, consider ARPA. Suppose from a certain point you observe that ARPA’s OI is steadily increasing. At the same time, CVD also begins to trend upward.

This development indicates scenario one: long positions are actively opening, buyers are entering the market coherently. In this case, the assumption of short-term growth for ARPA looks justified.

However, one important caveat: even if CVD is positive, if it still remains below the zero line in absolute terms, it means short positions still dominate historically. Therefore, a bullish move is likely in the short term, but its scale may be limited.

Combining OI with additional indicators for greater confidence

OI and CVD are powerful tools, but the most reliable results come from their combination with other indicators. Analysts often combine position analysis with technical metrics.

Exponential Moving Average (EMA) is a popular tool that helps determine the main trend direction. If OI and CVD indicate buyer entry, and EMA on the chart confirms an upward trend, you gain additional confidence in your forecast.

Combine three signals:

• Positive OI change (capital entering)
• Rising CVD (buyers dominate)
• EMA in an upward position (trend confirmed)

When all three point in the same direction, the probability of a successful trade increases significantly.

Practical recommendations for short-term traders

If you engage in short-term trading, remember these safety rules:

1. Always set a stop-loss. Indicators are data points, but the market remains unpredictable. Sudden reversals happen often.

2. Take profits gradually. Instead of waiting for maximum growth, consider partial closing of positions when profit targets are reached.

3. Check liquidity. Signals are most reliable for tokens with sufficient trading depth. Low-liquidity assets can show distorted data.

4. Don’t rely solely on one timeframe. Check signals across different time scales to get a fuller picture.

Conclusion

OI and CVD analysis are not magic tools, but they provide a structured way to identify when big money is entering altcoins. Combining them with other technical tools and following strict risk management rules can significantly improve your trading decisions.

Most importantly — understand that the cryptocurrency market is extremely risky. Even with the most reliable signals, the probability of losses exists. Use this knowledge for learning and developing your strategy, but never risk more than you can afford to lose. All the above recommendations are for educational purposes only and do not constitute investment advice.