Open interest measures the total number of derivative contracts still active at a given moment, without distinguishing between long and short positions. Unlike volume, which reflects daily activity, open interest represents an accumulated stock of commitments that grows when fresh money enters the market with leverage. In November 2021, a few days after bitcoin’s all-time high of $68,982, BTC futures open interest reached a record of approximately $24 billion, signaling excessive leverage before the market’s sharp reversal. To interpret this indicator, traders cross-reference it with price action: rising prices with increasing open interest confirms a trend driven by new money, while rising prices with declining open interest often indicates short covering rather than genuine demand.
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