Every futures contract has a buyer and a seller, so open interest counts positions, not trades. If a new long trades with a new short, open interest rises by one contract. If an existing long sells to an existing short who is closing, it falls by one. If a position simply passes from one trader to another, it does not change. Exchanges publish it per contract, in coins or in dollars.
Example
BTC rises from $60,000 to $63,000 while open interest climbs from $9 billion to $10.5 billion: new money opened positions into the move. If price then drops to $61,000 and open interest falls back to $9.2 billion within hours, much of that new leverage has been closed or liquidated.
Why it matters
Volume shows activity; open interest shows how much leverage is sitting in the market. Rising price with rising open interest means new positions are backing the move. High open interest combined with extreme funding points to crowded positioning, which is the fuel for squeezes.
Common mistake
Reading rising open interest as bullish by itself. It only says that more contracts are open, and every long has a short on the other side. You need price, funding and liquidation data to judge which side is adding and which side is under pressure.
Put it into practice
FAQ
- Is open interest the same as volume?
- No. Volume counts every contract traded in a period, including positions opened and closed in the same minute. Open interest is a snapshot of the contracts still open at a point in time.
- What does falling open interest during a drop mean?
- Positions are being closed, often through stop losses and long liquidations. Once that deleveraging is over, the selling pressure from forced exits ends with it.
- Should I look at open interest in coins or in dollars?
- Coins are cleaner for comparing over time, because dollar open interest also rises when the price rises, even if no new positions were opened.