Open-Interest is Back to the Level Where it Was Pre-FTX Collapse: What Does it Mean?

Open-Interest is Back to the Level Where it Was Pre-FTX Collapse: What Does it Mean?

By CryptoManthan | Smart Crypto | 17 Aug 2023

Open-Interest is one of the critical measures that can be used to determine the sentiment of the market and is often used by experienced traders in their trading setup. In this article, we will have an overview/ of what Open-Interest is and the current updates on Open-Interest. So, let's dive in...!

What is Open-Interest?

Open-Interest is a term that is used in the derivatives market which represents the number of contracts that are yet to be settled or closed. Open Interest shows the activity happening in the derivatives market and gives an idea about the market liquidity along with the inflows and outflows of the assets in the market.

The higher Open Interest represents that there is a rise in the inflow and the liquidity in the market and it is considered a bullish sign. And opposite to that the market lower Open Interest shows that there is an outflow going on in the market and the liquidity is decreasing. Even though the high Open Interest represents a bullish trend, extremely high Open Interest indicates a trend reversal, which is a bearish trend sign.

Using Open Interest in the trading setup can benefit a lot but it is important to understand it properly before including it in the setup, as its misperception might result in losses. If you are interested in learning more about Open Interest, check out this guide by Investopedia {{LINK}}

Open Interest is at High Level!

As we are now familiar with Open Interest to some extent, now let's move to the latest movements going on in the market. As mentioned in the heading of the article, the Open Interest is at all high levels where it was Pre-FTX Collapse, we can see that in the chart below.

Open interest at high level

Currently, the future contracts exceed $10.6 billion, which shows the huge Ol. The majority of the contracts are on the buying side. This high value of the Open Interest is an indication that the market has enough liquidity to go wild on either side. A spot event will be responsible for triggering this liquidity. It will be interesting to see which side this will go, for that confirmation we have to be patient and look actively for the signals in the market.

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