Funding rate vs open interest.
Both numbers describe crypto leverage, and people mix them up constantly. They measure different things — and only one of them earned a place in our score. Here’s the difference, in plain English.
Skew vs size
- Funding rate = the skew. Which side the crowd is leaning (long or short), and how much they’re paying to hold it. It’s a read of consensus and crowding.
- Open interest = the size. The total dollar value of futures positions currently open on a coin. It’s a read of how much leverage is in play, regardless of direction.
An analogy: funding tells you which way a boat is leaning and how hard; open interest tells you how many people are aboard. Both matter — but they answer different questions.
Nearly uncorrelated — and that’s the point
Because they measure different things, funding and open interest are nearly uncorrelated across coins (about 0.04 in our tests). That made open interest a genuinely promising candidate for a second factor — a different axis, not a repeat of funding. A real second factor has to be independent, and this one was.
Independent isn’t enough — it has to predict
Being a different axis gets you into the test, not into the score. When we ran open interest through the gauntlet, its marginal information over funding and momentum was statistically insignificant and fragile — its significance even flipped on a routine data refresh. So it stays as context, not a driver of the calibrated read.
Funding crowding is the skew that predicts. Open interest is the size that doesn’t — at least not yet, and not on our universe. (The full test.)
Common questions
What’s the difference between funding rate and open interest?
Funding rate measures the skew of positioning — which side the crowd is leaning, and how much they pay to stay there. Open interest measures the size — the total value of positions open. One tells you the direction of the crowd, the other tells you how big it is.
Are funding and open interest correlated?
Surprisingly little. In our tests their cross-sectional correlation was about 0.04 — they’re genuinely different axes. That’s why open interest was worth testing as a second factor, even though it ultimately didn’t make the score.
Why does Ioxer use funding and not open interest?
Because funding survived out-of-sample validation and open interest didn’t. Open interest’s marginal information over funding + momentum was statistically insignificant and fragile — so it stays as context, not a score factor.
Ioxer is research, not investment advice. IOX is a crowding read — not a price prediction, not a buy/sell signal.