Bitcoin Faces a Key Moment as Leverage Resets

In Brief

• Bitcoin is holding near $78k after a sharp leverage-driven selloff.
• Falling open interest and funding rates point to a leverage reset, not panic selling.
• The next move depends on whether spot demand continues to defend support.

Bitcoin is attempting to stabilize near the $78,000 level after a sharp downside move triggered widespread liquidations across derivatives markets. While price briefly dipped below this zone, buyers stepped in quickly, pushing BTC back above support as leverage conditions reset.

The move comes amid elevated volatility, declining open interest, and cooling funding rates. These are classic signals of a leverage flush while many investors fear a structural breakdown.

However, it doesn’t reflect a structural breakdown because the data points to positions being closed instead of fresh downside bets being added.

Liquidations Spike as BTC Tests Support

Data from February 1, 2026 shows over $252 million in Bitcoin liquidations in the past 24 hours, with longs accounting for the majority of forced closures.

Additionally, more than 25,000 traders were liquidated globally as BTC volatility exceeded 6.1% on the day.

On the other hand, and despite the sharp price drop, flows remain net negative, indicating that Bitcoin is not flooding onto exchanges at panic levels.

When evaluating historical data, analysts agree that sustained exchange inflows usually happen due to spot-driven sell pressure. However, this isn’t the case as of today.

Open interest across Bitcoin derivatives also declined to approximately $52.5 billion. Confirming that excess leverage is no longer in the picture.

Therefore, aligning with the mechanical nature of the selloff, where forced liquidations accelerated downside once key leves were lost.

What Comes Next if Bitcoin Defends $78K

With leverage largely flushed and funding rates normalized, Bitcoin now faces a very dramatic inflection point. Indeed, if $78k holds, price action could stabilize into a consolidation phase as positioning resets.

Similarly, active address counts remain elevated, suggesting continued network usage despite short-term volatility.

However, a decisive break below $78K would change the narrative. In that scenario, selling pressure could shift from mechanical liquidations to spot-driven conviction loss, potentially extending the drawdown.

The market absorbed a violent leverage reset, and the next move will depend on whether spot demand can defend this critical level.

For now, Bitcoin is holding its line. Also, it’s important to note that this drawdown is driven by short-term positioning resets, not a deterioration in Bitcoin’s underlying fundamentals.