What each signal measures
Funding approximates the periodic payment between longs and shorts in perpetual contracts. Open interest counts outstanding contracts. Liquidity describes how much volume the market can absorb without moving price too far. None predicts direction automatically.
Combinations worth questioning
Price and open interest rising alongside very positive funding can show demand, but also an increasingly crowded long. Falling open interest during a rally may be short covering rather than new buyer conviction.
- Compare venues; one source can be skewed.
- Separate position growth from price rotation.
- Look at depth and spreads, not only aggregate volume.
- Define which observation would invalidate your reading.
From signal to decision
Use these metrics to frame scenarios, not to justify an entry you already chose. A useful reading ends with observable conditions: what you expect, for how long and what you will do if it does not happen.