What is open interest?
The total value of derivative contracts currently open and not yet closed or settled.
Not yet verifiedHow we verify
3 min read
In this entry
The total value of derivative contracts currently open and not yet closed or settled.
It appears on every derivatives dashboard beside volume, and the two measure genuinely different things. Volume counts what traded during a period. Open interest counts what is still outstanding right now, so a contract opened and closed within an hour adds to volume twice and leaves open interest unchanged.
It is a derivatives statistic and says nothing about spot supply. Rising open interest alongside a rising price means new positions are being opened rather than old ones closed, which is the usual reason people watch it.
How it works
Every derivative contract has two sides. When a new buyer and a new seller open a position against each other, one contract is created and open interest rises by one. When both sides close, it falls by one. When a new participant takes over an existing position from someone exiting, it is unchanged, because the contract still exists with a different holder.
That accounting is why open interest is a measure of committed capital rather than of activity. A market where open interest keeps climbing has more leverage outstanding than one where the same volume churns through positions opened and closed the same day.
The figure is usually quoted in the notional value of contracts or in units of the underlying asset. Which one matters, because notional open interest can rise purely because the price rose, with no new positions opened at all. Comparisons across time are cleaner in units.
Its practical use is as a fragility indicator, not a direction indicator. Large open interest concentrated at high leverage means many positions sit close to their liquidation levels, and one move can trigger a cascade where forced closes push the price further and liquidate more positions. Sharp falls in open interest during a price move are the signature of exactly that.
Example
Illustrative sequence on a single contract.
| Event | Volume | Open interest |
|---|---|---|
| New buyer and new seller open | +1 | +1 |
| Buyer sells to a new buyer | +1 | Unchanged |
| Second buyer closes against the original seller | +1 | -1 |
| Total for the session | 3 contracts | Back to zero |
Three contracts of volume, and no open interest at the end. A dashboard showing high volume and flat open interest is describing exactly this pattern: activity without accumulating commitment.
Why it matters when you buy
If you buy spot only, open interest never touches your position, but it does describe the conditions your purchase lands in. A market with heavy leveraged positioning can produce sharp moves driven by liquidations rather than by anything about the asset, and those moves are when spreads widen and fills get worse. The measured spread and depth conditions on the liquidity pages are the part that actually affects your cost.
Related terms
- derivatives — the contracts being counted
- perpetuals — the dominant crypto contract type
- funding rate — what positioning costs to hold
- liquidation — how open interest falls suddenly
- leverage — why the figure signals fragility
- trading volume — the activity measure beside it
Questions
Does high open interest mean the price will move?
No. It means more contracts are outstanding, which raises the potential size of a liquidation cascade if the price does move. It carries no information about direction.
Why does open interest fall during a crash?
Because positions are being closed, many of them forcibly. A large drop alongside a sharp price move is the visible trace of liquidations clearing out leveraged positions.
Is open interest the same as market cap?
No. Market cap values an asset's circulating supply. Open interest values outstanding derivative contracts, which can exceed or fall short of anything about the spot market.