Open Interest Skew

Open Interest Skew is a derivative metric that indicates the imbalance between long and short positions in a market. When open interest is heavily skewed towards one side, it suggests that the majority of market participants are betting on a specific price direction, which can lead to rapid liquidations.

In crypto derivatives, this skew is often used as a contrarian indicator, as extreme positioning often precedes a reversal. Large skews can also indicate a lack of hedging activity, leaving the market vulnerable to sudden price swings.

Traders analyze this metric to identify potential squeeze events, where a rapid price move forces the dominant side to cover their positions. It is a fundamental component of understanding market sentiment and positioning risk.

Monitoring skew helps in forecasting volatility and identifying structural imbalances in the derivative landscape.