Open interest

The total notional value of all perpetual or futures contracts in a market that are open and not yet closed. Rising open interest means new positions are being opened, falling open interest means positions are being closed.

Definition

Open interest counts positions, not trades. Every open contract has a long and a short side, and the figure represents the notional value of that stack of live commitments. It rises when a trade opens new exposure on both sides and falls when a trade closes existing exposure.

Why it is not volume

Volume measures activity over a period and resets. Open interest measures what is still outstanding right now and carries over. The same contract can trade hands many times in a day without changing open interest at all.

Read together, the two say something neither says alone. Price rising on rising open interest means new money is taking the move on. Price rising while open interest falls means the move is being driven by positions closing, which is a different and usually shorter-lived thing.

What it tells you about risk

High open interest concentrated in one direction is where cascades come from. Those positions have liquidation prices, and liquidation prices cluster. A move that reaches a cluster forces closes, which move the price further, which reaches the next cluster.

It also bears on whether you can get out. A market with a lot of open interest but a thin order book is one where a rush for the exit will move the price a long way.

Its limits as a signal

Open interest says how much exposure exists, not who is on which side or what they intend. It is context for a decision, not a decision. Pair it with the funding rate and, on pool-based venues, with the open interest imbalance to see how the two sides are actually distributed.

Where you will run into it

On the market statistics of any perpetual DEX, in protocol dashboards, and as an input to per-market caps: several protocols limit total open interest per market, and new positions in the crowded direction can be refused when the cap is reached.