In the crypto market, the indicators I most frequently rely on to identify potential risk are Futures Open Interest (OI) and funding rates.

I pay particular attention to two types of extreme risk signals:

1. Exhaustion signals:

When prices make new highs while OI remains flat or declines, it suggests that the move is driven primarily by short-covering rather than fresh capital inflows. This often creates a fragile liquidity vacuum, which typically signals that a sharp reversal may be imminent.

2. Overheating signals:

When prices rise while OI surges rapidly within a short period and funding rates spike to unusually high levels, it indicates that the market has entered an over-leveraged state. Positioning becomes highly crowded, increasing…