Open interest is the number of contracts currently outstanding. A trade between two people opening new positions raises it; a trade between two people closing lowers it; a transfer between one opener and one closer leaves it unchanged.
So volume and open interest can move independently, and the same distinction applies as in pool depth versus volume: one is a flow, the other a stock.
Why the stock is the risk measure
Open positions are what has to be unwound. High open interest means a large book of leveraged exposure that must eventually close — voluntarily or, if price moves far enough, through the liquidation engine.
A market can trade enormous volume with flat open interest, which is churn: the same exposure changing hands. And it can trade modest volume with steadily rising open interest, which is quiet accumulation of leverage — less visible and more consequential.
Direction plus open interest
The pairing is the standard read, and it is genuinely informative: price and open interest rising together means new positions funding the move, while price rising as open interest falls means the move is closing positions rather than opening them. That framework is set out fully in open interest and price.
The denomination trap
Open interest can be quoted in contracts, in the coin, or in dollars, and the three tell different stories. Dollar-denominated open interest rises when price rises even if not one new contract was opened — so a chart of dollar OI in a rally partly measures the rally.
Coin-denominated open interest is usually the cleaner read on whether leverage is genuinely being added. Anyone comparing OI across time or across coins should say which denomination they are using, for the same reason a funding rate needs its interval.