Open interest
Also called: OI
Definition
Open interest is the total number or value of derivatives contracts, such as futures or options, that are currently open and not yet closed or settled.
How open interest works
Every futures contract has a long side and a short side. When a new buyer and a new seller open positions, open interest rises. When both sides close, it falls. When one trader passes a position to another, it stays the same. Open interest is shown in contracts, coins or USD value.
Open interest is different from volume. Volume counts how much traded during a period; open interest counts how much is still outstanding at a moment. A market can have huge volume with flat open interest if traders open and close positions all day.
Traders combine open interest with price and funding. Rising price with rising open interest suggests new money is entering with leverage. Very high open interest relative to normal levels means a lot of leverage is in the system, which can lead to large liquidation cascades if price moves sharply. Data can be viewed per exchange or aggregated across many.
Example
Suppose BTC perpetual open interest on an exchange is 8 billion USDT. Over two days price rises from 60,000 to 64,000 and open interest climbs to 9.5 billion, while funding rises to well above its usual level. That points to new leveraged longs. If price then drops to 61,000 and open interest falls back to 8.2 billion within hours, about 1.3 billion USDT of positions closed, many through liquidation.
Common mistakes
- Confusing open interest with trading volume.
- Reading rising open interest as bullish without looking at whether longs or shorts are adding.
- Comparing open interest in coins on one site with open interest in USD on another.
Learn and practise
FAQ
Is high open interest bullish or bearish?
Neither by itself. It shows how much leverage is in the market; combined with price direction and funding, it hints at who is crowded.
Why does open interest drop suddenly?
Usually because many positions closed at once, often through a wave of liquidations or traders taking profit after a big move.