Cryptocurrency markets entered the third quarter of 2026 with significantly reduced leverage but also weaker liquidity. The wave of liquidations seen in the second quarter swept away much of the speculative positioning, while key drivers of market demand showed marked signs of fatigue in the same period.
Sharp drop in liquidations and open interest
According to institutional data provider Talos, liquidations of Bitcoin and Ether long positions totaled $8.35 billion in the second quarter. This massive deleveraging coincided with outflows from spot Bitcoin ETFs, a slowdown in Bitcoin purchases by Strategy, and a contraction in the supply of stablecoins. Talos is known for delivering market data and trading infrastructure targeting institutional investors.
Mini glossary: Open interest represents the total value of outstanding, unsettled futures and options contracts. A decline in this metric may signal lower risk appetite for leveraged trades across the market.
Talos data revealed that open interest in Bitcoin futures dropped 32% from its Q2 peak, now standing at $33.5 billion. Ether’s open interest declined even more sharply, falling 40% to $16.2 billion. These figures illustrate a substantial reduction in leveraged and high-risk positions compared to earlier periods.
Talos emphasized that the liquidation wave has reduced leveraged capital in the market, potentially limiting the risk of cascading forced sales but making price moves more volatile in less liquid trading conditions.
Liquidity weakens, volatility risk remains
However, reduced leverage alone did not leave the market on stronger footing. Talos noted a decrease in order book depth, which now makes markets less able to absorb new waves of selling pressure. While this shift could mean forced selling chains are shorter than before, large orders now pose a greater risk of driving sharp price swings amid thinner liquidity.
The 2% order book depth—a measure of total buy and sell orders near the market price for Bitcoin—fell from around $70 million at the start of May to a range of $35 to $40 million by late June. Quarterly spot exchange volumes also dropped 28% to $2.32 trillion.
| Indicator | Previous | Current |
|---|---|---|
| Bitcoin 2% order book depth | Approx. $70 million | $35–40 million |
| Spot exchange volume | Previous quarter | $2.32 trillion, down 28% |
ETF outflows suppress demand further
Weakness on the demand side became more apparent before the end of Q2. US-listed spot Bitcoin ETFs recorded net outflows of $696.3 million on June 25 alone. Throughout June, total ETF outflows reached nearly $4.5 billion, pushing the year-to-date net outflow to $5.5 billion.
The $696.3 million daily net outflow from US spot Bitcoin ETFs on June 25 was one of the clearest signals of weakening demand heading into the quarter’s end.
Along with ETF outflows, Talos noted that a slowdown in Bitcoin purchases by Strategy and a shrinking stablecoin supply also curtailed supportive inflows. Altogether, these factors have left markets with cleaner balance sheets moving into the third quarter, but prices remain vulnerable to abrupt swings.
