What Is Open Interest (OI)?

In derivatives markets, every open contract has a buyer (long) and a seller (short); open interest measures the total of these matched contracts. When a new buyer and a new seller trade, open interest rises; when existing position holders close their positions against each other, it falls; and when a position is transferred from one person to another, it stays unchanged. This makes it different from trading volume: volume shows all trades that take place in a given period, while open interest shows the positions that remain open at a given moment.

Analysts track open interest as an indicator of the capital entering the market and of the level of leverage. For example, a rise in open interest while the price is rising can be read as new positions supporting the trend, while a fall in open interest while the price is rising may indicate that the rally comes from the closing of short positions. In the cryptocurrency market, this data is published on various analytics platforms by exchange and as a total across all exchanges.

Very high open interest can mean that leveraged positions have built up in the market; in that case, a sharp price move can trigger cascading liquidations and sudden volatility. Open interest alone does not show the direction of the price; it should be interpreted together with the funding rate, volume, and price action.