Read the crowd 6 minFREE
Open interest and funding
How to tell a healthy rally from a crowded one.
Open interest (OI) is the total value of futures positions still open. Every contract has a long and a short, so OI measures how much money is engaged — not which side is right.
- Price up, OI up: new money is entering longs — the move has fuel, and also new people who can be liquidated if it reverses.
- Price up, OI down: shorts are closing (a “short squeeze”) — strong but often short-lived.
- Price down, OI up: new shorts, or longs adding — tension building.
- Price down, OI down: longs giving up or being liquidated.
Funding
Perpetual futures pay a funding rate between longs and shorts, usually every 8 hours, to keep their price close to spot. Positive funding: longs pay shorts — longs are crowded. Very high funding means many people pay a lot to stay long, which often precedes a flush.
Neither OI nor funding is a buy or sell signal on its own. They tell you how crowded a trade is — useful to size down when everyone agrees with you.
Check what you’ve learned
Two questions from this lesson. Get both right to mark it as done.