A price move can look strong while open interest is shrinking. That made me look twice.
Open interest measures outstanding derivatives exposure. Rising OI means positions are being added. Falling OI means contracts are being closed or liquidated.
Pair it with price. A $BTC rally on falling OI can be driven by shorts exiting rather than fresh participation. A drop in $ETH with falling OI can reflect longs getting flushed.
The common mistake is calling rising OI bullish. It isn’t directional. Every contract has a long and a short, so OI alone can’t tell you which side is aggressive, who’s hedged, or whether the new exposure is conviction or leverage chasing noise.
This is not financial advice. Do your own research.
Open interest measures outstanding derivatives exposure. Rising OI means positions are being added. Falling OI means contracts are being closed or liquidated.
Pair it with price. A $BTC rally on falling OI can be driven by shorts exiting rather than fresh participation. A drop in $ETH with falling OI can reflect longs getting flushed.
The common mistake is calling rising OI bullish. It isn’t directional. Every contract has a long and a short, so OI alone can’t tell you which side is aggressive, who’s hedged, or whether the new exposure is conviction or leverage chasing noise.
This is not financial advice. Do your own research.