Open Interest
The total number (or value) of outstanding derivative contracts that have not been settled or closed.
Open interest measures the total number of active (open) positions in a derivatives market — futures, options, or perpetuals — that have not been closed, expired, or settled. Each open contract represents one long and one short position: when a new long buyer is matched with a new short seller, open interest increases by one contract. When either side closes their position, open interest decreases.
Rising open interest alongside rising prices suggests new money entering the market and a strengthening trend. Rising open interest alongside falling prices suggests fresh short positions and a bearish trend building. Declining open interest during either direction suggests positions are being unwound, signalling a potential trend reversal.
In crypto, open interest in Bitcoin and Ethereum perpetuals is widely tracked as a market structure indicator. Very high open interest relative to market cap (leverage ratio) indicates an over-leveraged market vulnerable to cascading liquidations on any significant price move in either direction.