Open interest is the amount of funds that are in a contract at this moment. If you open a contract then as long as that contract is open it will be counted as open interest. This metric shows us how much contracts there are that still needed to be settled.
The Open interest is something a trader can use I many ways. First of all the open interest is a great metric to show the significance of other metrics like the funding rates. When the open interest increases, the funding rates are more significant. Because more contracts are a representation of that specific funding rate (wether positive or negative). Also when the Open interest is high it could mean we are going to see volatility in the markets. The higher the OI, the more volatile the markets can be as there is more liquidity with leverage in the markets. Also when the price of Bitcoin increases, you would like to see the open interest increase with Bitcoin too. This shows a more healthy and sustainable uptrend.
Find more information in our learning section on How to use the open interest for cryptocurrency trading.