MarketsBitcoin
|4 min ReadCrypto after $1.7B liquidations: squeeze or second leg lower
Maya Chen
Senior Analyst
Published
Jan 16, 2026
The shock and the setup
You felt the break. Monday wiped more than 1.0 billion in leveraged longs. Futures drove the hit. Over 1.6 billion in long positions were forced out as open interest fell from cycle highs. Binance, Bybit, and CME saw position size shrink, but liquidity stayed deep.
Spot hovered near $112,965 intraday. That is about 10 percent off the recent high. The market is digesting last week’s Fed rate cut and a fresh burst of volatility. When leverage resets, spot follows.
What the dashboards signal
Coinglass shows BTC futures open interest still edging lower. Perpetual funding pulled toward neutral. The liquidation heatmap clusters above and below spot. That is where the next pain trades.
Deribit and Laevitas show 25-delta skew with puts richer than calls. That means short-dated downside protection costs more. It also tells you market makers run negative gamma near spot. In simple terms, they chase price to hedge, which amplifies intraday swings until gamma turns positive.
Flows are split, not one way. Farside Investors shows a rare September net outflow on Wednesday, Sep. 17. About
150 million while FBTC and GBTC saw redemptions. Then Thursday and Friday flipped. About $385 million came in before the weekend. Mixed flows mute short-term momentum. Sustained inflows rebuild the bid.Term structure is your Q4 health check. CryptoQuant’s CME annualized basis rolled off mid-September highs. If it sits near 10 percent or lower, positioning is cleaner. A fast rebound above 15 percent means leverage is rebuilding.
Macro still nudges the tape. The Fed cut 25 basis points. The U.S. 10-year Treasury sits around 4.0 to 4.1 percent, while the dollar index firmed. That can cap beta when it matters, then fade when positioning takes over.
Regulated venues confirm the picture. CME Bitcoin futures show depth and steady participation into the quarter-end rolls. A lower basis with stable open interest signals normalization, not a full deleverage. A sharp drop in open interest would confirm a broader reset.
Seasonality adds a tailwind. Coinglass monthly returns show October often prints a positive median. Traders call it Uptober. Seasonality does not set direction, but with healthier derivatives it can tilt odds after a violent September.
Two paths and the tells
Path A is the squeeze. Price pushes into 124,000. That band overlaps a top-side liquidation cluster and common gamma friction near round numbers. Watch for up-day funding near zero or negative, a modest rebuild in outright shorts, skew drifting toward neutral, and several days of steady ETF net inflows. That turns remaining open interest into fuel. When gamma flips protective, the tape settles into a range.
Path B is the second probe. Price tests108,000. That area has lighter liquidation density than the recent low. Risks rise if skew stays negative, ETF demand softens, and both the 10-year yield and the dollar push higher. On down days, funding turns negative across majors. Implied volatility stays bid because market makers hold negative gamma below $115,000. That keeps the path lower until open interest is cut or option inventory flips the flow.
Here is the tell today. Even after the weekend flush, open interest sits above the year’s average. Funding eased but did not break. Heatmaps show tradeable clusters within 5 to 8 percent above and below spot. Farside’s ledger is split, not one way. CryptoQuant basis sits in watch mode. Deribit and Laevitas still show a put bias. If price grinds higher and shorts chase, the setup can reverse fast.
Trade the signals, not hope. If funding steadies near zero, ETFs stack daily inflows, and skew normalizes while the negative gamma zone lifts, the squeeze to 124,000 becomes the base case. If Treasury yields and the dollar stay firm, skew stays negative, and ETF flows wobble, pressure builds for a 108,000 test. The dashboards will confirm the path. Act when they align.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.