Updated 2026-07-25
Open interest divergence describes price and open interest moving in ways that do not line up. The four combinations each say something different. Price up with open interest up means new longs are being added. Price up with open interest down usually means shorts are covering rather than fresh buyers arriving. Price down with open interest up means new shorts. Price down with open interest down means longs are closing or being liquidated.
The practical value is separating a move that builds exposure from a move that removes it. A rally on falling open interest has less new leverage behind it and therefore creates less cascade fuel underneath. A rally on rising open interest does the opposite. As always this is descriptive: divergence characterises the move that already happened, it does not forecast the next one. Pair it with funding to see which side is paying to hold.