Unit 3 · Level 3 · Derivatives data
Open interest
Open interest (OI) is the total value of all derivative positions currently open. Rising OI means new money and new leverage entering; falling OI means positions closing, voluntarily or by force. The combinations matter: price up + OI up is a leverage-fuelled advance; price down + OI collapsing is a washout, where the excess gets flushed. OI tells you how much borrowed conviction is stacked in the market.
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What you get asked
Open interest measures…
OI counts open contracts, not trades. Volume is the flow of activity; OI is the stock of live positions: the standing army of leverage.
Match each price/OI combination to its classic reading
Price tells you what happened; OI tells you who was doing it: new positions entering or old ones dying. The pair beats either alone.
Open interest was €20B before a crash and €12B after. What percentage of OI was washed out?
8 ÷ 20 = 40%. A flush that size means an enormous amount of leverage was closed or liquidated. The market's debt got smaller in hours.
A rally built on surging OI is powered by ___, which can be forced to unwind violently.
Borrowed conviction cuts both ways: it accelerates the move up and guarantees forced sellers on the way down. High OI = high flammability.
Why do analysts often see a big OI flush as market-cleansing?
After the over-leveraged are carried out, there's less forced selling left to fear. Painful days, cleaner books. Some of the best entries in crypto history came right after flushes. 🐜
The rest of this unit
Funding, open interest, liquidations, options: read the leverage that moves crypto prices.