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2. Open Interest / Position / Open Contract Amount, Open Interest (OI) represents the "total number" of open contracts

: Refers to the open interest held by market participants within a certain period!

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OI is an equal amount of long and short → it means that when you open a 1 BTC long contract, there must be a reverse trader who opens a 1 BTC short contract~

Purely looking at the relationship between price and OI (without considering other factors) lazy bag:

Price increase + OI increase = long position opened

Price increase + OI decrease = short position closed

Price decrease + OI increase = short position opened

Price drop + OI drop = long positions closed

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Interpretation is easy, but there are many points to consider when using it. Here are some simple examples:

Market participants are adding to positions, OI rises

Since, as mentioned above, OI is equal to long and short, what we should judge is which party is more aggressive at the moment? What was the result?

Ex:

When you observe an increase in OI/increase in funding rates → new longs enter the market, but the price goes sideways/down, high funding rates may lead to bearishness, because going long without changing profits and losses will consume margin, which means Someone may be absorbing these new buyers~

The market falls and the funding rate increases. The high funding rate may cause the price to fall further. Some people are using leverage to buy. If the price falls further, it may lead to cascade liquidation!

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As shown in the attached picture, the price is trading sideways at a periodic bottom, the funding rate is rising, and OI is rising. The price has not risen significantly, and there is a slow downward trend, but OI is still rising, and finally the long positions are liquidated → OI sharply Fall, price rebound!

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