Module 7: Perpetual Futures
Open Interest and Positioning Data
Chapter 9 of 14 · about 6 minutes
9.1 "Longs are winning"
Mint saw a post: "70% of accounts are long Bitcoin! Bulls are in control!"
"If 70% are long, doesn't that mean more buyers?" Mint asked.
"Every long has a short on the other side," said Hash. "Exactly the same size. So 70% of accounts being long means the 30% who are short hold positions just as large in total, on average much bigger each. Positioning data is useful, but only if you understand what it's actually counting."
9.2 Open interest
Open interest (OI) is the total size of all open derivative positions in a market. Because every position has two sides, OI counts each matched pair once.
| Event | Effect on open interest |
|---|---|
| A new buyer and a new seller open positions against each other | OI increases |
| One trader closes and another opens on the same side, taking their place | OI unchanged |
| Both sides close their positions | OI decreases |
| A position is liquidated | OI decreases |
OI is a measure of how much leverage and exposure is in the market. Module 4, Chapter 15 introduced how traders combine it with price. This chapter goes deeper.
9.3 Coins versus dollars
OI is reported in two ways, and they can tell different stories.
| Value | |
|---|---|
| BTC open interest in coins | 500,000 BTC |
| BTC price | $100,000 |
| OI in dollars | $50 billion |
If BTC rises 10% to $110,000 with no new positions, OI in dollars rises to $55 billion, while OI in coins stays at 500,000. A headline saying "open interest hits a record" might simply reflect a higher price, not more positions.
When analysing whether leverage is actually building, OI in coins (or contracts) is often more informative. OI in dollars shows the total value at risk.
9.4 Reading OI with price
Here's the combination from Module 4, expanded with typical follow-up questions.
| Price | OI | Likely activity | Follow-up check |
|---|---|---|---|
| Up | Up | New positions opening, often leveraged longs | Is funding rising? Is spot volume confirming? |
| Up | Down | Shorts closing or being liquidated (squeeze) or longs taking profit | Were there short liquidations? |
| Down | Up | New shorts opening, or longs adding | Is funding falling or negative? |
| Down | Down | Longs closing or being liquidated | Were there long liquidations? |
A rally with rising OI and rising funding is often driven by leverage, making it more fragile (Chapter 8). A rally with stable OI and strong spot buying (Module 4, Chapter 15) is often healthier.
9.5 Leverage relative to the market
OI on its own doesn't tell you whether leverage is high or low compared with the market's size. Analysts use ratios such as:
OI to market cap. How large derivatives exposure is compared with the asset's total value.
Estimated leverage ratio. OI in coins divided by the coins held on derivatives exchanges (Module 6, Chapter 3).
| Example | Value |
|---|---|
| BTC open interest | 500,000 BTC |
| BTC held on exchanges | 2,400,000 BTC |
| Estimated leverage ratio | ~0.21 |
A rising ratio over time suggests more leverage built on the same collateral base, which increases the risk of cascades. Use it to compare against its own history rather than as an absolute level.
9.6 Long/short ratios
Many exchanges publish long/short ratios. These come in different forms:
| Ratio type | What it measures |
|---|---|
| Account ratio | Share of accounts holding net long versus net short positions |
| Position ratio | Share of position size held long versus short among a group of traders |
| Top trader ratio | Positioning of the exchange's largest traders |
Remember that across the whole market, total long size always equals total short size. So these ratios describe who holds positions, not whether there are more buyers than sellers.
A high account ratio, many small accounts long, combined with large traders mostly short, is sometimes read as retail crowding against professionals. Some traders treat extreme retail positioning as a contrarian signal. But definitions vary by exchange, and each exchange shows only its own users.
"So '70% of accounts are long' tells me retail is bullish," said Mint. "Not that more money is betting on a rise."
"Exactly," said Hash. "Which some traders actually read as a warning."
9.7 Aggregating across exchanges
Crypto derivatives trade on many centralised and decentralised exchanges. Each has its own OI, funding, and positioning data. Aggregated data across exchanges gives a fuller picture.
Useful aggregates include total OI across major exchanges, OI-weighted funding (funding rates weighted by each exchange's share of OI), and liquidation totals across exchanges.
Data aggregators collect these, but coverage varies, and some exchanges report data in different ways. Decentralised perp exchanges (Chapter 13) publish positions on-chain, which adds transparency.
9.8 Options and positioning
Positioning also appears in options markets, covered in the Crypto Options module. Large options positions can influence spot and perp prices, especially near expiry dates. For now, it's enough to know that perps aren't the only source of leveraged positioning.
9.9 Putting it together
Mint built a simple positioning snapshot:
| Data | Reading (illustrative) | Interpretation |
|---|---|---|
| Price | Up 12% in a week | Strong rally |
| OI in coins | Up 18% | New positions opening |
| Funding | 0.04% per 8 hours | Longs paying heavily |
| Account long/short ratio | 2.5 | Retail heavily long |
| Estimated leverage ratio | Near its yearly high | Leverage building |
| Spot volume | Flat | Rally led by derivatives |
"The rally is leverage-driven, retail-crowded, and expensive to hold," said Mint. "I wouldn't short it just for that. But I wouldn't open a new leveraged long here either."
"That's exactly how positioning data should be used," said Hash. "Not to predict, but to judge how fragile the market is."
9.10 Try it yourself
Using a derivatives data aggregator, record today's BTC OI in coins and in dollars, OI-weighted funding, and the account long/short ratio on one major exchange. Repeat daily for a week, alongside price. Which of the patterns in section 9.4 did you see?
Key takeaways from this chapter
- Open interest is the total size of open derivative positions, rising when new pairs open and falling when they close or are liquidated.
- OI in dollars rises with price; OI in coins better shows whether positions are actually growing.
- Combining price and OI changes shows whether moves are driven by new leverage, squeezes, or deleveraging.
- Ratios like OI to market cap and the estimated leverage ratio show leverage relative to the market's size.
- Long/short ratios describe who holds positions, not whether there are more buyers; total longs always equal total shorts.
- Aggregate data across exchanges for a fuller picture.
- Use positioning data to judge how crowded and fragile the market is, not to predict direction.