How does Open Interest can determine the bitcoin prices ?

[UmerIdrees]

I have recently come to know that the On chain data "Open Interest"  in futures market is very useful and it can determine the bitcoin next move.

Can anyone tell details about Open Interest, where this data can be fetch (free of cost) ?
Also how does this data works like when the Open Interest is high and when it is low and how can we use this data effectively in our trades.

[Poker Player]

I have recently come to know that the On chain data "Open Interest"  in futures market is very useful and it can determine the bitcoin next move.

Can anyone tell details about Open Interest, where this data can be fetch (free of cost) ?
Also how does this data works like when the Open Interest is high and when it is low and how can we use this data effectively in our trades.

Yeah, sure. Crystal ball 2021 version.

If you're going to say things like the ones I've put in bold, you'd better provide compelling arguments for it.

[SquirrelJulietGarden]

Open Interest positions can not determine price of Bitcoin. It can help you to assess whether the market is overheated and becomes too risky. You can consider Open Interest to make your decision, to close your position if you are in Margin or Future trading. Even if you are holding, you can take profit and wait for correction.

It can point out times of correction but can not determine price.

[stompix]

I have recently come to know that the On chain data "Open Interest"  in futures market is very useful and it can determine the bitcoin next move.

LMFTFY.
Open Interest data might help you guess where the price is going, or not, as volatility can always go two ways.
Anyhow, here is the data:
https://www.theblockcrypto.com/data/crypto-markets/futures

Just remember, if there was a guaranteed method where everyone could make money without risks, how would that have worked since we would end with infinite money, coming from....?

[Bitcoin_Arena]

Open Interest is the total number of contracts held by positions opened by traders at any given time. The total number of contracts in open positions can be from both traders who short and traders who long.

So every time you open a short or long position, it means the open interest will increase by the number of contracts in your position, every time you close a short or long position, it means the open interest will decrease by the number of contracts in your closed position.

Therefore when open interest spikes, it means there are so many traders who have opened positions at a given time perhaps in anticipation to a strong movement or the market or trend. If the open interest plunges, it means there are so many traders who had open positions have closed them at a given time perhaps in anticipation to the movement or due to weakened market trend and momentum.

You can't determine market movement alone using open interested. You need to combine it with other indicators like volume. Exchange apps like Bybit can send you notifications of open interest during certain market conditions.

You can also get Open Interest(OI) data from tools like coinalyze - https://coinalyze.net/futures-data/coins/

Here is a summary from investopedia

General Rules for Volume and Open Interest





More details for better understanding:
1. https://www.investopedia.com/articles/technical/02/112002.asp
2. www.elearnmarkets.com/blog/open-interest-analysis-stock-market-trends/

[Leviathan.007]

I'm not sure but maybe you are a bit confused about the base of open Interest. It's just the total number of bitcoin contracts by bitcoin traders and Investors at any timeframe. But as far as I know, open Interest cannot actually act as an indicator for bitcoin price by itself, It's will show us where the price is going and the people who use this method for the bitcoin market will usually check the other market indicators such as volume and combine these two for the analysis.

[UmerIdrees]

I have recently come to know that the On chain data "Open Interest"  in futures market is very useful and it can determine the bitcoin next move.

Can anyone tell details about Open Interest, where this data can be fetch (free of cost) ?
Also how does this data works like when the Open Interest is high and when it is low and how can we use this data effectively in our trades.

Yeah, sure. Crystal ball 2021 version.

If you're going to say things like the ones I've put in bold, you'd better provide compelling arguments for it.

Yeah, I don't mean it to be the crystal ball. No tool can predict the bitcoin price but we can use all the tools to find the best possible analysis.

LMFTFY.
Open Interest data might help you guess where the price is going, or not, as volatility can always go two ways.
Anyhow, here is the data:
https://www.theblockcrypto.com/data/crypto-markets/futures

You can also get Open Interest(OI) data from tools like coinalyze - https://coinalyze.net/futures-data/coins/

I found the two sites quite informative.
Is the data on these two sites real-time ? If so, we can have an alternative to glass node but free of cost. 

[enhu]

For BTC you can be sure there are lots of traders who enter a position in the market while the price dips. You however wouldn't know when the price will go up for it may take several days to weeks before it will go up again. The volatility is just making the market unpredictable even when you use the indicators, you will still be guessing especially if you trade in a shorter time frame.

[pooya87]

Things like that could help but only sometimes and only a little. You may have a better prediction that is closest to what the price could be in some cases but the problem is that the market is mainly affected by human behavior and that can not be predicted, whether it is the irrational short term panic buys and panic sells or the longer term adoption and buy surges or anything else.

[Akash1243]

To answer your question briefly,No open interest doesnt directly affect the price of bitcoin but it can be used as one of the instruments for risk management and assessment.As traders open more Long and Short positions on Bticoin futures,open interests increases and this in turn combined with other factors  and indicators helps us in predicting the movement of bitcoin rather than its price.