what is open interest

What Is Open Interest (OI)?

Open Interest (OI) refers to the total number or notional value of derivative contracts that are currently active and have not yet been settled. This metric includes all open positions—both long and short—that remain unclosed, unexpired, or undelivered. OI is most commonly seen in perpetual contracts (which have no expiry date) and fixed-term futures contracts (which do), and is typically displayed in terms of contract units or their notional USD value.

When OI changes, it reflects shifts in capital inflows and the accumulation of leverage within the market, but it does not inherently indicate which side—bullish or bearish—is dominant.

Why Is Open Interest Important?

Open Interest helps traders gauge overall market participation and assess whether volatility may be amplified by leverage.

• When price increases are accompanied by rising OI, it generally indicates new money entering the market, suggesting that the trend could continue.
• If prices rise but OI falls, this more often signals that existing positions are being closed for profit, which may weaken trend continuation.
• Conversely, a price drop alongside rising OI is often due to new short positions or increased hedging, potentially raising the risk of forced liquidations.

For short-term traders, OI can signal the likelihood of a short squeeze: when funding fees (periodic payments between long and short positions used to anchor perpetual contract prices to the spot market) are heavily skewed to one side and OI is elevated, a rapid price reversal can trigger a cascade of forced liquidations (when maintenance margin thresholds are breached).

How Does Open Interest Work?

OI fluctuates based on whether new positions are being opened or old ones are being closed.

• When a new long position matches with a new short, both sides open fresh contracts—OI increases.
• When an existing long closes against an existing short, both positions are settled—OI decreases.
• Transfers between accounts or handovers of open positions to another party typically do not affect total OI.

OI is usually displayed in two ways: by contract units (e.g., 1 contract = $100 face value) or by notional value (latest price × number of contracts). Most crypto exchanges provide notional USD OI to allow easy comparison across different tokens.

OI itself is direction-neutral; it only measures the total size of open positions. To infer bullish or bearish sentiment, traders should consider price trends, funding rates, and basis (the difference between futures and spot prices; a positive basis often indicates stronger demand for long positions).

How Is Open Interest Used in Crypto Markets?

OI is a staple indicator on trading dashboards for perpetual and futures contracts, helping traders assess momentum, market strength, and risk in conjunction with price and volume data.

For example, on Gate’s BTCUSDT perpetual contract:

• If OI surges during a breakout while funding rates are positive but not excessive, this typically signals that new longs are driving the trend.
• If price rallies while OI declines, it’s often due to shorts covering and old longs taking profits—a less favorable setup for chasing upside.

In altcoins (such as those themed around AI or RWA), rapid OI growth concentrated on just a few platforms often means shallow liquidity. When sentiment reverses, highly leveraged positions may trigger forced liquidations and “long wick” candles. In such scenarios, pay attention to position concentration, each platform’s liquidation rules, and funding rate caps.

Around macro events (e.g., major inflation data or central bank decisions), a common pattern is for OI to build up before the event and then quickly unwind after. Both bulls and bears hold positions to speculate on volatility; once uncertainty resolves post-event, positions are reduced.

How to View and Use Open Interest on Gate

Open Interest can be viewed directly in both trading and analytics pages on Gate and should be analyzed alongside price, volume, and funding rate data.

1. Log in to Gate and navigate to the “Contracts” section; select your trading pair (e.g., BTCUSDT perpetual).
2. On the trading dashboard under “Data/Indicators” or “Statistics,” select “Open Interest/OI.” For more granular breakdowns, visit Gate’s market data section or use third-party analytics platforms like Coinglass for cross-platform comparisons.
3. Analyze OI in combination with price trends, volume, and funding rates:
   • Price up + OI up = likely trend expansion
   • Price up + OI down = profit-taking or position reduction
   • Extreme funding rates (persistently high or low) with high OI = risk of squeezes or liquidation cascades

Example: On Gate’s ETHUSDT perpetual contract, if a consolidation range breaks out with increasing volume and OI rises from low levels while the funding rate shifts from negative to balanced positive, following the trend short term is safer. If funding rates are excessively high with OI at historical highs, consider reducing leverage or scaling out to avoid liquidations triggered by minor pullbacks.

Recent Open Interest Trends Worth Watching

This year, crypto derivatives OI has remained near record highs, with volatility closely tied to key events.

Q3 2025 data shows total crypto futures and perpetual contract notional OI fluctuating between $30–38 billion. BTC accounts for roughly 45–55% of this OI, ETH for 20–30%, with altcoins’ share rising significantly during sector rotations. Data sources include Coinglass and quarterly reports from The Block Research.

Over the past six months, it’s common for BTC and ETH OI to rise ahead of major news or policy releases, only to drop back over the following 2–5 trading days. Several times in H2 2025, sharp single-day price swings were accompanied by falling OI—a sign of rapid deleveraging via forced liquidations and stop-losses.

Compared to 2024, 2025 has seen derivatives trading concentrate even further in perpetual contracts, while fixed-term contracts’ share continues to decline. This amplifies the influence of funding rates. OI is also more concentrated among leading platforms—when these exchanges experience risk events or outages, market impact can be significant.

What’s the Difference Between Open Interest and Trading Volume?

OI tracks “how many open positions exist,” whereas trading volume tracks “how much was traded during a specific period.”

A day’s trading volume can be high even if there’s no change in net open positions—if trades are simply switching hands among existing positions, OI stays constant. Conversely, a surge in newly opened positions lifts OI even if daily volume isn’t exceptional. Understanding this distinction helps avoid confusing “active trading” with “new capital entering.”

Additionally: Market cap is calculated as price × circulating supply and is entirely separate from OI. Market cap reflects asset scale; OI indicates leverage and participation. The two should not be conflated.

Common Misconceptions About Open Interest

1. Assuming rising OI always means bullish or bearish momentum. In reality, OI only shows position size; directional bias must be inferred from price action and funding rates.
2. Focusing solely on total OI without considering its distribution. If an altcoin’s OI is highly concentrated on just a few exchanges, risk is higher than if it’s distributed across multiple venues—making liquidation cascades more likely.
3. Overlooking leverage levels and margin rules. Maintenance margin requirements and liquidation algorithms differ across platforms; identical OI values can carry different risks. Always check each platform’s risk parameters before trading.

Related Terms

• Open Interest: The total number of outstanding derivative contracts in a market, reflecting aggregate market participation.
• Derivatives: Financial instruments whose value derives from underlying spot assets—including futures, options, and similar products.
• Leverage Trading: Trading with borrowed funds to amplify position size, increasing both potential gains and risks.
• Liquidation Price: The price at which an exchange automatically closes a position once losses reach a certain threshold.
• Perpetual Contract: A type of derivative contract without an expiry date that allows traders to hold positions indefinitely until closed.

FAQ

What does a sudden increase in Open Interest indicate?

A rise in Open Interest usually means that participants are establishing new positions—either bullish or bearish—reflecting increased market conviction. If this happens alongside rising prices, it points to aggressive buying; if prices fall as OI rises, it signals new short selling. However, increased OI can also foreshadow greater volatility ahead; always combine this indicator with other metrics.

What impact does falling Open Interest have on trading?

Declining Open Interest suggests traders are closing out positions and exiting the market—participation is waning. This can signal an impending trend reversal or fading consensus. When OI drops sharply, markets may enter a consolidation phase with lower volatility—a key sign that sentiment is shifting.

How can Open Interest help identify market tops or bottoms?

A market top often forms when both price and OI reach extreme highs—an indication that longs are overcrowded. Bottoms tend to appear when both price and OI are low—implying shorts have been flushed out. Extreme readings of OI combined with sharp price moves and abnormal volume frequently precede reversals; however, relying solely on OI can lead to misjudgments—always use additional technical indicators for confirmation.

How should retail traders use Open Interest data?

Retail traders can monitor real-time Open Interest for major coins on Gate’s contract markets to gauge sentiment and risk appetite. When both price and OI are at historic lows, it may present a buying opportunity; when both spike higher together, beware of potential corrections. Use OI as one reference point among many—and always set stop-losses for protection.

How does Open Interest relate to liquidation events?

The larger the Open Interest, the greater the amount of leveraged exposure in the market—and thus the higher the risk of mass liquidations during sharp price swings. When volatility spikes with high OI outstanding, cascading liquidations can amplify moves. This is why all-time-highs in OI often precede flash crashes—increasing risk awareness is crucial as leverage builds up.

Further Reading

• https://www.investopedia.com/terms/o/openinterest.asp
• https://en.wikipedia.org/wiki/Open_interest
• https://us.etrade.com/knowledge/library/perspectives/daily-insights/options-open-interest
• https://groww.in/p/open-interest
• https://www.cmegroup.com/education/courses/introduction-to-futures/open-interest.html
• https://www.tastylive.com/concepts-strategies/open-interest