Open interest explained: count it in coins, not dollars

Open interest is the total size of the positions still open on a futures or perpetual market. Every position has two sides, a long and a short, so open interest counts each contract once, not twice. Most sites quote it in dollars, which is useful for size, but mixes two things together: how many positions are open, and the price. So on each coin's perpetuals page, the site counts the change in open interest in the coin itself.

What is open interest?

When a trade opens a new long against a new short, open interest goes up by the size of the trade. When a long and a short both close against each other, it goes down. When a position simply changes hands, it doesn't move.

Open interest isn't volume. Volume counts every trade made; open interest counts what's still open after them. A market can trade heavily all day and end it with the same open interest it started with.

Open interest in dollars or in coins?

Open interest in dollars is the coins held open times the price, so it moves when either of them does:

Example figures, not market data. In the second row, open interest in dollars rose 10% without a single position opening: it was all price. Counted in coins, nothing changed until the third row, when positions really did open.

That's why the Change in open interest chart on each coin's perpetuals page (Bitcoin's, for one) counts in the coin rather than in dollars: so the price moving on its own doesn't look like positions opening or closing. Open interest in dollars is still there for size. It's how the perpetuals index is sorted when it opens, largest first.

How to read open interest beside the price

Traders often read the two together. Counted in coins, the usual readings are:

These are rules of thumb, not certainties. Every position has two sides of the same size, so open interest alone can't say which side is right, only that more, or less, is at stake. In dollars, the price would exaggerate the first and last rows and muddy the middle two.

Where to see open interest on the site

• The perpetuals index shows each coin's open interest in dollars, across the exchanges you have on. Hover it for each exchange's share.
• A coin's perpetuals page, under Open interest & funding, shows each exchange's open interest now in dollars, its share, and how much it has changed since the chart began, in the coin. The chart beside it draws that change for each exchange: a line rising as positions open and falling as they close.

Some exchanges update their figure less often than others, so their lines move in steps. And exchanges don't all count open interest the same way, so treat the gaps between them as approximate: the change on each, over time, is the part to read.

Open interest and funding

Open interest is also half of funding's bill. What longs pay shorts in an hour, the funding flow, is open interest times the funding rate for an hour, and the perpetuals index's Funding flow/hr column works it out for every coin. As it uses open interest in dollars, it grows with the price too, even at the same rate. Funding rates, side by side explains the rates themselves.

What open interest doesn't tell you

• Direction. It doesn't say whether the longs or the shorts are right; the two sides are always the same size.
• Leverage. The same open interest can be held with little margin or a lot, and where positions would be liquidated isn't in it.
• Who holds it. A few large positions and many small ones can add up to the same figure.

Not financial advice. Open interest moves while you read it.