Crypto glossary
Notional value
Notional value is the total market value of the asset controlled by a derivatives position, as opposed to the smaller margin actually posted for it.
Notional value equals the number of contracts times the contract size times the current price. A position of 2 BTC in bitcoin futures has a notional value of 200,000 dollars when bitcoin trades at 100,000 dollars, whether the trader posted 200,000 dollars, 20,000 at 10x or 4,000 at 50x. Leverage is simply notional value divided by margin.
Headlines about crypto derivatives almost always use notional figures: open interest of tens of billions of dollars, options worth several billion expiring on a Friday, or a single trader opening a 100 million dollar position. Exchanges also use notional value to set margin tiers and position limits.
Notional value overstates the money at stake. A large expiry with mostly out-of-the-money options may involve only a small fraction of its notional in actual payouts, and open interest can rise simply because price rose. Comparing notional with margin and with spot trading volume gives a clearer view of real risk.
Example
A trader posts 3,000 dollars of margin to open a 20x ether long; the position has a notional value of 60,000 dollars, and that is the figure counted in the exchange's open interest.