Definition ∞ Bitcoin Open Interest represents the total number of outstanding derivative contracts for Bitcoin that have not yet been closed. This metric counts all active futures, options, or perpetual swap contracts that remain unsettled. It provides an indication of market liquidity and the total amount of capital allocated to Bitcoin derivatives. A rising open interest suggests new capital entering the market, while a falling figure indicates contracts are being closed.
Context ∞ High Bitcoin open interest often precedes periods of increased price volatility, as large positions can trigger cascading liquidations. Analysts frequently monitor open interest alongside price action to identify potential market turning points or confirm existing trends. Its value helps assess the speculative sentiment and leverage levels within the Bitcoin derivatives market.
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