Introducing Open Interest (OI) at Polymarket Analytics
Open Interest (OI) has been one of, if not the most under-reported metric in prediction markets.
However, it's a great metric for getting a live read on trader conviction.
Executive Summary
- Why you should care: OI tracks real money still at risk, converting price noise into conviction you can measure.
- What I found: OI spikes often show up ahead of headlines and price swings, as in the Next-Pope and Russia–Ukraine cease-fire markets.
- How I use it: Viewing OI daily, charting it against price and volume, and focusing on markets where OI runs deep.
Open Interest = Where Conviction Lives
Price and volume are loud. Conviction is quiet. Open Interest (OI) captures the dollars still on the table after each trade, revealing where traders stay committed.
What OI Really Is
Open Interest is the total value of unresolved positions. Imagine a poker table:
- Volume counts every chip that moves.
- OI counts only the chips left in play.
OI vs. Volume: Walk-Through
- Trade 1 – A and B each buy "Yes" for $10
- Cumulative volume = $20
- OI = $20
- Trade 2 – C buys A's and B's $10 tickets
- Cumulative volume = $40
- OI = $20
Transfers lift volume; only fresh money moves OI.
Quick Signals
- Price ↑ — OI ↑ New money is chasing momentum.
- Price ↑ — OI ↓ Short-covering or a weak rally.
- Price ↓ — OI ↑ Bearish conviction from fresh shorts.
- Price ↓ — OI ↓ Exhaustion, possible bottom.
Key take-aways
- Conviction gauge: Rising OI signals new funds, not churn.
- Liquidity check: High OI usually deepens books and trims slippage.
- Sentiment early warning: OI often twitches before headlines hit the wire.
Case Studies
- Next-Pope market: Pope Francis died on 21 April. OI in the "Next Pope" market exploded from <$20 K on 19 April to >$400 K by 22 April
- Russia–Ukraine cease-fire 2025: On 11 Feb a surprise Trump-Putin prisoner swap hit the wire; OI jumped from ≈ $600 K to ≈ $1.5 M that day. Peace-talk headlines followed on 12 Feb, but capital had already voted.
Source: https://polymarketanalytics.com/markets/16108#openInterest
Caveats
- One whale can warp OI in a thin market.
- Rising OI during a price slide usually means fresh shorts, not dip-buyers. Context rules.
Putting OI to Work
- Chart OI with price and volume and flag standout spikes
- Trace the why and dig for the trigger. Check fresh headlines, X threads, Discord whale alerts, and wallet flow to pinpoint any stories behind the spike.
- Decide quickly as headlines often write the story later.
Final Thought
Price is noise. Volume is chatter. OI is conviction. Track conviction and you'll spot the next move before the crowd even looks up.
Not financial advice. For informational purposes only.
