Introduction to Open Interest, Cumulative Volume Delta, Funding, and Orderbook Depth.
Understanding what drives price is more than reading candles, the crypto markets are now dominated by derivatives, other financial instruments and constantly changing liquidity conditions. To make informed decisions you need to understand the underlying flow that moves price, not just the outcome. Lucky for you in crypto all of this data is free in all avenues, so the information asymmetry that exists in TradFi markets is not an issue.
In this guide I'll cover four super important flow metrics: Open Interest (OI), Cumulative Volume Delta (CVD), Funding Rates, and Orderbook Depth. Together, they'll allow you to see how much leverage is in the market, who is trading aggressively, how crowded each side is, and how much real liquidity sits behind price action. You don't need to be an advanced orderflow trader to understand and apply these concepts.
Derivatives are contracts that track the price of an asset without you holding the asset itself. Most trading happens through perpetual futures, which look like normal contracts but have no expiry. They stay inline with the underlying price using a combination of the contract's quote currency, the mark price, and a pricing mechanism enforced through funding rates.
Every derivative contract has two sides:
So a BTCUSDT perpetual contract means:
This matters since the contract does not move based on how the underlying's spot price moves alone, but rather on a pricing mechanism the exchange uses.
To stop manipulation, exchanges do not use their own spot price to calculate liquidations, instead they use a mark price:
This is why your liquidation is triggered at the mark price, not the chart price, keeping it consistent between exchanges.
There are two main types that are mainly used, Linear Contracts & Inverse Contracts.
Linear Contracts:
Inverse Contracts
These days most of the volume traded in the market is in derivatives which means the mechanics become more and more important.
This means price reacts more to:
Okay enough of the boring stuff, lets get into some of the fun stuff.
Open interest (OI) measures the total number of open derivative contracts. It shows how much leverage is active in the market at any moment. If OI is increasing, new positions are being opened. If OI is decreasing, positions are closing or being forced-closed.
Here's the thing, OI does not tell you whether those positions are long or short, because every long must be matched by a short. What OI actually shows is the amount of exposure in the market. More exposure means more potential energy behind a move, less means the market is unwinding and becoming more stable.
There are only three things that can happen with OI:
This is why OI is best viewed with price, as you want to see how OI is changing relative to price movements, not just the final value.
The relationship between OI and price gives you context on whether a move is strong or weak.
These patterns apply to crypto more than traditional markets because leverage is high and reacts quickly.
OI Delta shows the bar-to-bar rate of change in open interest, not just the absolute number. It tells you how aggressively leverage is entering or leaving the market.
Thus, it is useful in spotting:
OI is one of the cleanest leading metrics in crypto because derivatives dominate volume, and large moves always occur with either:
Low OI environments tend to chop, High OI environments trend or lead to a violent mechanical unwind
Cumulative Volume Delta (CVD) tracks the net aggression in the market by comparing executed market buys versus executed market sells. It accumulates this difference over time, giving you a running measure of who is hitting the market harder.
Note: CVD does not track limit orders, it only measures the side of the trades who cross this spread.
There are two separate markets with very different participants:
Because of this, spot CVD is more reliable for trend confirmation, while perp CVD is more useful for identifying sentiment or forced flows.
This means:
Some key scenarios:
Often the market behaves like this:
So spot is shows sustained accumulation or distribution.
Perps show emotional, over-leveraged, or trapped flow.
When spot leads, the move is usually sustainable, whereas when perps lead the move is usually fragile.
Divergences happen when price moves one way and CVD moves the other.
Some examples:
As powerful as CVD can be, it does not have the full picture. CVD does not account for iceberg orders, or large limit players. It is not including over-the-counter (OTC) trading, which big firms use to reduce/ remove massive impacts to the market. Lastly it does not tell you if buyers are opening longs, or closing shorts.
Funding is a periodic payment exchanged between long and short traders on perps. It exists to keep the perp price aligned with the underlying spot price. If the perp trades above the spot, longs pay shorts. If the perp price trades below the spot, shorts pay longs. Funding does not move the market by itself. What matters is who is paying, how much they're paying, and whether they can sustain it.
Perpetual futures have no expiry, so they need a mechanism to stay close to spot price. Funding does this by financially pressuring the side pushing the contract away from equilibrium.
For most exchanges this is repeated every 8 hours, which is enough to keep the contract anchored.
Positive Funding
Negative Funding
Funding rate does not mean longs or shorts outnumber the other. For every long there is always a short. Funding measures aggression and imbalance, not direction
Funding only becomes meaningful when paired with price, like most other metrics.
High or low funding does not automatically reverse price, there are a few things that actually matter.
If funding is extreme but OI is flat or falling, it usually does not mean much, but if funding is extreme and OI is rising then the market is loading one side aggressively which creates asymmetric risk.
Funding is not directional, it's just giving you insight into positioning pressure. It is best used to spot times in the market like:
Funding only applies to perps. Spot traders don't pay or receive anything. If spot is trending strong whilst perps show extreme funding the other way, the perp side usually loses. For example if we have spot buying with negative funding, the short crowd is trapped. The same thing for the other side, if we have spot selling and positive funding, the long crowd is trapped.
Orderbook depth shows the amount of resting limit orders sitting on both sides of the book (bid and ask). Unlike CVD, which shows aggression, depth shows the passive liquidity waiting to be executed. Essentially telling you how stable or fragile price is in the immediate environment.
On Kiyotaka there is depth up to 10% from current price, which means you see all visible liquidity stacked in a +/-10% range.
Depth is about liquidity, not direction. It answers questions like:
When traders talk about "stability" or "thin books", they are talking about depth conditions.
This is best for identifying:
Orderbook depth delta shows the difference between bid liquidity and ask liquidity at each level.
This display is more for seeing:
It compresses a lot of information into a single gradient, making liquidity bias easier to spot at a glance.
5.3.1 Thick Book
You never assume a wall is real until price trades near it. In crypto there is a lot of spoofing, which in short is large orders placed with intent to remove them as price approaches to mislead other market participants of the true supply and demand.
Well that's the crux of it, all of these metrics will give you a deeper understanding of how the market is positioned and this is not the entire picture. There are plenty of other important factors like liquidations, basis, volume, etc. None of them are signals by themselves, even when combined they purely provide context. The only way to turn the insight into an edge is a well structured backtested system, so you actually know the expected value behind your decisions.