HiveComb

When I trade crypto assets and read crypto posts on social media, I frequently encounter mentions of OI (Open Interest) and Funding Rate. These two terms originate from derivative contracts. In extremely hot bull markets or severe bear markets, it's common to hear news about OI and Funding Rates, which fluctuate significantly and often reach extreme highs or lows.

Is it reasonable to use these two indicators for trading? Why do many news media outlets and crypto influencers mention them as tools for gauging market sentiment or making predictions? Based on my intuition and limited experience, I have some reservations, but they can still be used as reference indicators.

Open Interest refers to active derivative contracts that have not been settled yet. An increase in OI indicates that more funds are entering the market in anticipation of price changes in underlying assets.

The Funding Rate is a short-term payment between long and short traders, aimed at balancing the spot price of the underlying asset with the contract price. If the funding rate is positive, long traders pay shorts; if it's negative, shorts pay longs.

These two indicators are highly sensitive to market changes and often confirm market trends after prices have already moved. Therefore, it can be challenging to use them as leading indicators. However, since the crypto market is still evolving, my initial conclusions may need adjustments based on changes in market structure or regulations.