Open Interest Series · Part I
What open interest is and how it is measured
Open interest is the number of derivative contracts that are currently open — positions that have been entered and not yet closed. It is a stock, a standing balance, not a flow. Volume tells you how much changed hands during a period; open interest tells you how much is still on the table when the period ends.
Every contract has two sides, so a long and a short always exist in equal number. Open interest counts the pair once, not twice: if 100 BTC of longs are open, 100 BTC of shorts are open too, and OI is 100 — not 200. This is why "the market is net long" is never true of a futures market as a whole. Positioning is always balanced; what changes is who is crowded and who is comfortable.
How open interest moves
Every trade matches a buyer with a seller, and each of them is either opening a new position or closing an existing one. Three outcomes follow:
OI rises when both sides open. Someone new goes long, someone new goes short, and a fresh contract comes into existence. New money, new risk.
OI falls when both sides close. A long who wanted out sells to a short who wanted out; the contract is extinguished. Money leaving, risk retiring.
OI is flat when one opens and the other closes. The contract survives, it just changes hands. Volume was printed, but the total exposure of the market did not change.
The one-line version: volume measures activity, open interest measures commitment. A day can print enormous volume and end with open interest exactly where it started — that is a day when positions rotated between traders rather than being built.
Units: contracts, coins or dollars
The same market's open interest can be quoted three ways, and mixing them up produces bad conclusions. Contracts is the raw count — meaningful only if you know the contract size ($100 per contract on most COIN-M venues). Coin-denominated OI (in BTC or ETH) measures how many coins of exposure exist. Notional OI multiplies that by price and reports dollars.
The trap is that notional OI moves when price moves, even if not a single new position was opened. A 20% rally lifts dollar OI by 20% on its own. When you want to know whether traders are actually adding exposure, read coin-denominated OI; when you want to know how much dollar risk is sitting in the system, read notional. Both are legitimate — they answer different questions.
Where the number comes from
Open interest is not estimated: each exchange knows exactly how many contracts are open on its own books and publishes the figure, typically updated every few seconds on perpetuals. Aggregated OI across venues is a sum of those feeds, which is why it can jump when a venue's API stalls or when an exchange is added to or removed from the aggregate.
Two more practical notes. OI is per market: BTC USDⓈ-M perp OI, BTC COIN-M perp OI, and BTC quarterly futures OI are separate numbers that behave differently, and only the sum describes total positioning. And OI drops sharply and mechanically at the settlement of dated futures — perpetuals, having no expiry, never show that pattern.
Knowing what moves the number is only half of it. The interesting part is what a change in OI means when you read it next to price — which is Part II.