When Bitcoin broke through the $111,500 liquidity zone, perpetual shorts faced cascading margin calls, reaching up to $114,000.
As upward momentum waned, long positions that had chased the breakout were liquidated during the decline, a pop-and-flush pattern characteristic of leverage resets.
Approximately $320 million in unwinds occurred around the dip to $108,000, with variations across data providers depending on the measurement window.
Funding rates entering the session sat near neutral following the prior week’s selloff, while futures open interest rebuilt toward $26 billion.
Funding rates compressed from positive 0.005% to 0.004%, reflecting reduced willingness to pay premiums for leveraged long exposure after the round-trip price action eliminated speculative positions on both sides.
The liquidation sequence left funding rates roughly flat and open interest lower than recent peaks, removing the overhang of crowded positioning that amplifies volatility.
Confirmation of a genuine reset requires several observable conditions over the following 24 to 48 hours.
Open interest (OI) should remain below prior peaks rather than immediately rebuilding through fresh leverage. OI-weighted funding rates need to center near zero percent across major venues, indicating balanced positioning between longs and shorts.
Rising spot trading volume as a share of total Bitcoin activity would strengthen the reset thesis, showing price discovery driven by spot demand rather than derivatives positioning.
CME basis behavior provides additional confirmation, while exchange-traded fund (ETF) flows turning net-flat to positive after periods of outflows would add support.
Bitcoin’s ability to sustain moves above $110,000 depends on whether spot demand can absorb the reset positioning.
The $5,541 intraday range on Oct. 21 cleared speculative excess, but directional conviction requires spot volume to increase relative to perpetual and futures activity.
Monitoring open interest stability, funding rate behavior, and the perpetual-spot basis over the next two days will clarify whether the liquidation wave established a foundation for sustained movement or merely paused before another volatility cycle begins.
