Methods for Calculating a Supply Proportion: Murphy's Explanation

Murphy, a respected figure in technical analysis of cryptocurrencies, recently shared his insights on X regarding how to calculate an offer proportion. His methodological approach reveals how analysts can effectively determine liquidity concentrations over a defined price range.

How to Calculate a Proportion from the Order Book

The technique Murphy advocates relies directly on data from exchange order books. This method allows for precise identification of the distribution of supply within a 5% range around the spot price. By analyzing the orders recorded on the order books, traders can quantify the volume of assets available at different price levels, providing greater transparency into the true market liquidity.

This approach yields more granular results than alternative methods because it captures actual pending transaction data rather than theoretical estimates.

Why Abandon the Visible Range Volume Profile

The VPVR (Volume Profile Visible Range) is a widely used alternative methodology, but Murphy highlights its limitations in the context of current markets. While VPVR analyzes past price history to determine concentration levels, this approach does not always reflect the dynamic configuration of the order book in real time.

The key difference lies in the data source: VPVR relies on a limited historical sample, whereas calculation via the order book provides a live read of current market intentions. For traders seeking to optimize their entry and exit strategies, this distinction is fundamental.

Practical Applications for Analysts

Understanding how to calculate an offer proportion using the order book method is essential for various market participants. Market makers can identify areas of insufficient liquidity, swing traders can refine their support and resistance levels, and analysts can produce more accurate reports on market dynamics.

Murphy’s clarification helps standardize analysis practices within the cryptocurrency community, fostering a better mutual understanding of offer metrics and price formation processes on both decentralized and centralized exchanges.