Cryptocurrencies have evolved significantly since the early days of 2009 from only having one crypto, Bitcoin, to now having even associated derivatives assets. 

One of those assets is the futures contract, which is a contract that has the value of an underlying cryptocurrency attached to it. 

The futures contract can be traded on the futures market, where traders can utilize the existence of leverages to maximize their potential profit in the market. 

Although it can give significant returns for experienced traders, it often also leaves traders with huge losses, which is why analysis is a huge aspect to keep in mind when trading those contracts. 

One of the ways to analyze the contract when trading it is through the open interest data, which will be talked about in this article today. 

Futures Market’s Open Interest Data

The open interest data is data that shows how many contracts are being held in a specific period. 

It represents the transaction volume of a specific contract which can be used to see how traders are reacting to the asset underlying it. 

In the cryptocurrency market, all the data are counted off-chain and on-chain after the trading day is complete. 

But, because there are no closing hours in the crypto market, all the data will usually be summarized after the closing of the global daily candlestick. 

The data is calculated on-chain and off-chain, meaning that these transactions occur not only outside the blockchain but also inside the blockchain. 

This is because unlike other markets, in the crypto market, the futures contract can be traded outside of the blockchain through a centralized exchange that has a broker, or through a decentralized exchange with no third parties whatsoever. 

All of these futures contracts are the same as they are aggregated through an oracle that connects the data outside and inside the blockchain.

How to Use it for Daily Analysis

In conclusion, the open interest data are data that can be used to see how many people are holding the contract and have not liquidated it. 

When analyzing the market, the contract can be used as a sign to see the market sentiment whether the market is bullish or bearish.

Two specific patterns usually occur and can be used to analyze the market when trading the futures contract as well as the crypto asset itself. 

The pattern is that, when the open interest is high, usually the market is bullish. This is because when the open interest data is high, it means that traders are confident in trading their contracts as there is a clear trend with little volatility, giving hints of a bullish movement. 

However, when the open interest is low, usually the market is bearish. This is because traders are often hesitant to open a position or a trade with the contract when the market is bearish as there are potential sudden price corrections with volatilities involved. 

So, when trading the futures market or the regular crypto market, also known as the spot market, traders can use these two patterns as support for their analysis bias. 

Both of these are common patterns that are utilized by experienced traders to increase their probability of earning higher rewards. 

To view these data, traders can use websites such as Coinglass to better understand how the market is moving. 

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