Bitcoin Slides 4.5% in Two Hours as Open Interest Collapses Below $20B

Leverage reset intensifies as $207M in longs are liquidated, while steady ETF inflows signal resilient spot demand.

Bitcoin dropped 4.5% in just two hours, falling to $64,200 for the first time since February 5. The sharp move triggered heavy selling in futures markets, forcing leveraged positions out. Although BTC has rebounded to around $66,148, price action still reflects a strong short-term downtrend.

Sentiment Turns Bearish as Leveraged Positions Collapse

A sharp 4.5% drop in Bitcoin triggered a wave of forced exits across futures markets. According to Santiment, open interest fell to $19.5 billion, nearly half of the $38.3 billion recorded on January 14. Such a contraction confirms a large reduction in leveraged exposure.

📉 Bitcoin just dropped -4.5% in the span of just 2 hours, falling to a market value of $64.2K for the first time since February 5th.

🌊 Many longs have gotten liquidated, and $BTC open interest has dropped to as low as $19.5B, under half of the 2026 peak of $38.3B back on… pic.twitter.com/ujhMRhTXTw

— Santiment (@santimentfeed) February 23, 2026

In simple terms, a large amount of borrowed trading has been flushed out of the system. Before the fall, funding rates were positive. Positive funding shows that most traders were betting the price would rise.

When too many traders hold long positions at the same time, risk builds up. Once Bitcoin broke below $65,000, those crowded longs were forced to sell.

Meanwhile, around $233 million in positions were wiped out within 24 hours. Long trades made up roughly $207 million of that total, compared to short positions of about $27 million. 

Heavy imbalance between long and short liquidations points to a long squeeze. Selling was mainly driven by leveraged traders being forced out, not by balanced pressure from both sides of the market.

Bitcoin’s drop happened late Sunday night in the U.S., when online activity is usually low. Even so, negative sentiment quickly rose to its highest level in two weeks.

After price fell below $65,000, many retail traders turned fearful and bearish. That kind of reaction often leads to panic selling. In past cases, sharp spikes in fear have sometimes been followed by short-term rebounds, especially when selling becomes excessive.

Institutional Buying Holds Firm Despite Derivatives Shakeout

Spot market activity presents a more stable backdrop despite recent volatility in derivatives. U.S. spot Bitcoin ETFs recorded a daily net inflow of $88.10 million, equivalent to approximately 1,320 BTC. 

Notably, ongoing inflows during a price pullback suggest institutional spot demand remains intact. Capital entering ETFs as prices decline often reflects accumulation.

Meanwhile, derivative markets have undergone a clear reset. Open interest has nearly halved from its yearly peak, and funding rates have normalized following the long squeeze. Such conditions point to a significant deleveraging event, with excess speculative positioning largely flushed out.

Similar episodes in past cycles often marked short-term exhaustion points instead of prolonged downside trends. Market participants are now watching price behavior around the $64,000 to $65,000 zone.

Continued ETF inflows combined with lighter derivatives positioning would strengthen the case for a relief rebound. However, failure to hold that range could reopen downside pressure.