Bitcoin (BTC) on October 21st saw its price swing from $110,552 to $114,019 before retreating towards $108,000, executing a classic short squeeze followed by a long liquidation to eliminate excess derivatives exposure, forcing the liquidation of $740 million in leveraged positions.
According to data from Coinglass, long positions closed within 24 hours amounted to $435.63 million and short positions amounted to $304.64 million.
When Bitcoin broke through the $111,500 liquidity zone, perpetual shorts faced cascading margin calls reaching up to $114,000.
As the upward momentum weakened, long positions chasing the breakout were liquidated during the decline, a pop-and-flush pattern characteristic of leverage resets.
An unwinding of approximately $320 million occurred near the drop to $108,000, but there is variation across data providers depending on the measurement window.
Funding rates remained near neutral at the start of trading following last week’s decline, and futures open interest recovered towards $26 billion.
Futures and open interest remained relatively stable amidst the volatility. Futures open interest increased 0.91% daily to $3.47 billion, while indefinites decreased 0.02% to $969.71 billion, according to data from CoinMarketCap.
After round-trip price action eliminated speculative positions on both sides, the funding rate compressed from a positive 0.005% to 0.004%, reflecting a reduced willingness to pay a premium for leveraged long exposures.
Derivative neutrality indicates a cleaner setup
The series of liquidations has left funding rates nearly flat, open interest lower than recent peaks, and crowded position overhangs that amplified volatility eliminated.
A genuine reset requires some observable conditions over the next 24-48 hours.
Open interest (OI) should remain below its previous peak, rather than immediately rebuilding using new leverage. OI-weighted funding rates should cluster around 0% across major venues, indicating a balanced positioning between long and short.
The increase in spot trading volume as a proportion of total Bitcoin trading volume strengthens the reset theory and indicates that price discovery is driven by spot demand rather than derivative positioning.
CME basis trends will provide further support, while exchange-traded fund (ETF) flows will turn net flat to positive after a period of outflows, providing support.
According to data from Farside Investors, the Spot Bitcoin ETF has recorded inflows of $214.3 million as of this writing, with IBIT and five other funds expected to be included in the tally. The move reverses four consecutive days of outflows totaling more than $1 billion.
Whether Bitcoin can sustain the price movement above $110,000 will depend on whether spot demand can absorb the reset position.
The $5,541 intraday range on Oct. 21 has cleared speculative excess, but spot volume needs to increase relative to perpetuals and futures to be confident in direction.
Monitoring open interest stability, funding rate trends, and permanent spot basis over the next two days will reveal whether the liquidation wave has established the foundations for a sustained move, or whether it is simply a pause before another volatility cycle begins.
(Tag translation) Bitcoin
