Cryptocurrency Market Data Analysis

Decoding Crypto Exchanges: Are Your Trades Really Real?

Lena Voss in Business & Economy December 2025 • 4 min read.

"Uncover the truth behind Bitcoin perpetual swaps and how discrepancies in trading data could impact your investments."

Perpetual swaps have become a cornerstone of cryptocurrency trading, offering a way to speculate on or hedge against price movements. Unlike traditional futures, these swaps don't expire, relying on a funding rate to stay aligned with the underlying asset. This mechanism, maintained by arbitrageurs, ensures that the swap price mirrors that of Bitcoin or other cryptocurrencies.

Open interest, representing the total number of outstanding contracts, is a key metric for assessing market activity, sentiment, and liquidity. It provides insights into the amount of capital at play and the potential for price volatility. Knowing the open interest can also help estimate the collateral required for various cryptocurrency markets on an exchange.

However, a new study reveals alarming discrepancies in how some of the largest crypto derivatives exchanges report open interest in Bitcoin perpetual swaps. By analyzing tick-by-tick data from seven leading exchanges, researchers have uncovered systematic misreporting, raising questions about the true state of liquidity and leverage within these platforms.

What is Open Interest and Why Does It Matter?

Open interest is the total number of outstanding contracts for a specific cryptocurrency derivative, like a perpetual swap. Think of it as the total 'sum' of all positions that are currently active in the market. This is a crucial metric because it tells you a lot about the market's overall health and potential for future price swings.

Here's why open interest is so important:

Market Activity: A rising open interest generally signals increased participation and liquidity in the market. More traders are opening new positions, indicating growing interest in the underlying asset.
Sentiment Indicator: Open interest can provide clues about market sentiment. For example, if open interest is increasing alongside rising prices, it may suggest a bullish outlook, as more traders are betting on further price increases.
Liquidity Gauge: Higher open interest typically means greater liquidity, making it easier to enter and exit positions without significantly impacting the price.
Collateral Estimation: Open interest helps you to estimate lower bound on the collateral required for every cryptocurrency market on an exchange. This number, cumulated across all markets on the exchange in combination with proof of reserves, can be used to gauge whether the exchange in question operates with unsustainable levels of leverage, which could have solvency implications.

If exchanges aren't accurately reporting open interest, it's like flying blind. Traders could be making decisions based on false information, potentially leading to unexpected losses and increased market volatility.

Protecting Yourself in the Crypto Market

The findings of this study serve as a crucial reminder to exercise caution and due diligence when trading cryptocurrency derivatives. While the allure of high leverage and potential profits can be strong, it's essential to be aware of the risks and potential for manipulation. By understanding the limitations of reported data and employing sound risk management strategies, traders can navigate the crypto market more effectively and protect their investments.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.5195/ledger.2024.325,

Title: Reconciling Open Interest With Traded Volume In Perpetual Swaps

Subject: q-fin.tr q-fin.st

Authors: Ioannis Giagkiozis, Emilio Said

Published: 23-10-2023

Everything You Need To Know

What are Bitcoin perpetual swaps, and how do they differ from traditional futures?

Bitcoin perpetual swaps are a type of cryptocurrency derivative that allows traders to speculate on or hedge against the price movements of Bitcoin. Unlike traditional futures contracts, Bitcoin perpetual swaps do not have an expiration date. Instead, they use a funding rate mechanism to ensure their price closely mirrors the spot price of Bitcoin. This funding rate, managed by arbitrageurs, incentivizes traders to keep the swap price aligned with the underlying Bitcoin price, creating a continuous trading environment.

How does open interest help traders understand the crypto market and why is it important?

Open interest represents the total number of outstanding contracts for a specific cryptocurrency derivative, such as Bitcoin perpetual swaps. It's a critical metric for assessing market activity, sentiment, and liquidity. A rising open interest often indicates increased participation and liquidity, suggesting growing interest in the underlying asset. Open interest can also serve as a sentiment indicator, and help you to estimate lower bound on the collateral required for every cryptocurrency market on an exchange. Inaccurate reporting of open interest can mislead traders, potentially leading to poor decisions and unexpected losses.

What are the potential risks if crypto exchanges misreport open interest in Bitcoin perpetual swaps?

If crypto exchanges misreport open interest in Bitcoin perpetual swaps, traders might make decisions based on inaccurate information about market activity, sentiment, and liquidity. This can lead to unexpected losses and increased market volatility. Misreporting can distort the true state of the market, making it harder for traders to assess risks and opportunities effectively. Inaccurate open interest data can also impact the ability to estimate the collateral required for various cryptocurrency markets, potentially leading to unsustainable leverage levels and solvency issues.

Can you explain the role of arbitrageurs in maintaining the price of Bitcoin perpetual swaps?

Arbitrageurs play a crucial role in keeping the price of Bitcoin perpetual swaps in line with the underlying asset's (Bitcoin) price. They achieve this through the funding rate mechanism. If the swap price deviates significantly from the Bitcoin spot price, arbitrageurs can profit by taking offsetting positions in the spot and swaps markets. This activity helps to align the swap price with the spot price. For instance, if the perpetual swap price is trading higher than the spot price, arbitrageurs will short the perpetual swap and buy Bitcoin, which puts downward pressure on the perpetual swap price and upward pressure on the spot price, effectively narrowing the gap.

What steps should traders take to protect themselves when trading cryptocurrency derivatives, especially given the potential for data discrepancies?

Traders should exercise caution and due diligence when trading cryptocurrency derivatives, such as Bitcoin perpetual swaps. This includes verifying the accuracy of reported data, especially open interest, and considering information from multiple sources. Implementing sound risk management strategies, such as setting stop-loss orders and using appropriate leverage, is also crucial. Traders should understand the limitations of reported data and be aware of the potential for manipulation. Diversifying trading strategies and staying informed about market developments can also help traders navigate the crypto market more effectively and protect their investments.