First time messing with the Alpha 2.1, all game modes are equally crazy... still haven't beaten any of them, probably bc I'm too stubborn to play Normal mode lol. I also found a glitch at like the 15:20 mark in the video where you can't sprint or hide until she hits you again. Other than that this game is some heat!
Took a look, based on other playthroughs I've seen, that's not a bug. She was hugging you. From the moment she said "Senpai why would I ever let you leave?" she had her arms around you. As you can tell, it limits your movement.
I've seen some general confusion on that from other playthrough and many people even missing the hand that you can see when you look down. Maybe it's too subtle, maybe there should be a more overt hint that she's hugging you or maybe the subtlety of it all is fine and just adds to the panic/fear and the realization adds to the impact. I do wonder if her shadow projects itself alongside yours on walls though when she does hug you.
Not sure what direction they should go with that one detail, maybe something more overt on the moment she lets go to make it clear she was hugging you the whole time and is only now letting you go might make it far clearer as you'd get the realization only at the end.