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Open Interest Meaning

A key metric in the derivatives market (Futures and Options). It represents the total number of outstanding contracts that have not yet been settled or closed.

Unlike trading volume (which resets every day), open interest accumulates until the contracts expire or are closed. Rising open interest indicates that new money is flowing into the market-traders are opening new positions.

This usually confirms the strength of the current price trend. Falling open interest indicates that traders are closing positions and leaving the market.

In crypto, high open interest combined with high leverage is often a precursor to volatility. If too many traders are long, a small price drop can trigger a cascade of liquidations ("Long Squeeze"), wiping out the open interest rapidly.

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