💡 Open Interest (OI) & Liquidation Map
In cryptocurrency derivatives (Futures) trading, Open Interest (OI) and Liquidation Map are two essential tools for assessing cash flow and market risk.
I. Open Interest (OI) – Open Contracts
OI is the total number of leveraged contracts (Long and Short) that are currently open and have not yet been closed on the exchange.
• Increasing OI: Indicates that new money is flowing in, reinforcing the current price trend (upward or downward).
• Decreasing OI: Indicates that positions are being closed (taking profit/cutting losses/liquidation). The current trend may be weakening.
In summary: OI measures the STRENGTH and INTEREST of market participants. Higher OI means the market is more volatile as prices move.
II. Liquidation Map – Liquidation Chart
The Liquidation Map is a visual tool that shows the exact price areas where large volumes of leveraged positions will be liquidated.
Key roles:
1. Price magnets: Areas with high liquidation density (dark color) act as attractive targets (price magnets). Large traders (Whales) often push prices to these areas to trigger cascading liquidations, reaping significant profits.
2. Risk assessment: Helps identify price levels where the market is prone to sudden large Volatility.
• Long Liquidation (below current price) is a catalyst for prices to decrease.
• Short Liquidation (above current price) is a catalyst for prices to increase (Short Squeeze).
III. Relationship
High OI is the raw material for a dense Liquidation Map. The map shows you where OI is distributed and where risk is concentrated at price levels. Combining both helps you predict potential reversal points or acceleration of the market.
