Open Interest: New Money or Money Leaving

Two coins can rise 10% in the same week for completely different reasons. In one, buyers opened fresh positions. In the other, short sellers gave up and bought back. The chart looks the same. Open interest is how you tell them apart, and it drives one of the most important reads in the daily issue.

What open interest measures

Open interest is the total size of all perpetual futures positions that are still open. Every position has two sides: for every long there is a short. Open interest counts the positions once, not twice.

It changes in three ways:

• It rises when a new buyer and a new seller open a position between them. New money has arrived.
• It falls when both sides of a position close. Money has left.
• It stays flat when one trader opens and another closes, passing the position along.

The issue shows open interest in dollars, adding Binance and Hyperliquid together. It measures the daily and weekly changes on Binance, where the history goes back further. Keep one caveat in mind: dollar open interest also rises when price rises, even with no new contracts. A 5% price rise lifts dollar open interest by 5% on its own. So small changes deserve less weight than big ones.

The four reads

On its own, open interest has no direction. Put it next to price and it tells you who is driving the move. The daily issue uses these four reads, each over 7 days:

• Price up, open interest up: new longs. Buyers are opening fresh positions. The move has new money behind it.
• Price up, open interest down: short covering. Shorts are buying back to close. The rise is real, but it is fuelled by people leaving, and it can fade once they are out.
• Price down, open interest down: long liquidation. Longs are leaving, by choice or by force. The issue calls this "longs leaving".
• Price down, open interest up: new shorts. Sellers are opening fresh positions. The fall has new money behind it.

Say a coin is up 8% on the week and its open interest is up 25%. That is new longs: a move with fresh conviction behind it. Now say a second coin is also up 8%, but its open interest is down 15%. That is short covering. The chart is identical, but the second move has less behind it once the shorts have finished buying back.

Why a week, not a day

Open interest jumps around within a day as intraday traders open and close positions. A one-day change is mostly noise. Over 7 days, the noise washes out and you see whether money has really arrived or left. That is why the issue labels these reads as weekly. "Longs leaving" in the issue means longs left over the week, not overnight.

Reading the whole market at once

One coin's read tells you about that coin. Counting the reads across every coin the desk covers tells you about the market. If most of the 33 coins show longs leaving, money is leaving the long side broadly, and a long breakout on any single coin is swimming against that tide. If most show new longs, the market is adding risk. The issue prints this count every morning, because a setup that fights the whole market needs a stronger reason to take it.

Pairing open interest with funding

Open interest tells you how much money is in; funding tells you how much the longs or shorts are paying to stay in. Together they separate healthy moves from fragile ones:

• New longs with funding near the default: buyers are arriving without paying through the nose. Healthy.
• New longs with funding at an extreme for the month: buyers are piling in and paying heavily to do it. Fragile, because the crowd now has a lot to lose if price stalls.

That second case has its own rule at the desk, covered in crowded trades and liquidations.

Limits

Open interest cannot tell you who the new longs are, how leveraged they are or where their stops sit. It does not count spot buying at all. And each exchange only reports its own positions, which is why the desk reads changes on one consistent venue rather than comparing levels across venues. Treat it as evidence about positioning, never as a forecast.

Key takeaways

• Open interest counts open positions; it rises when new money arrives and falls when money leaves.
• Read it with price: new longs, short covering, long liquidation or new shorts.
• The issue uses 7-day changes, so these are weekly reads, not overnight ones.
• Pair it with funding to tell a healthy move from a crowded one.