This week, under East 8 Time, the Portuguese regulatory authority ordered the on-chain prediction market platform Polymarket to exit the local market within 48 hours. Meanwhile, the on-chain institution Trend Research continues to increase its leveraged position in ETH through Aave. These seemingly unrelated clues intertwine in the same macro environment. Behind the former is the political sensitivity of the U.S. presidential election-related market, with a single-source statistic exceeding €103 million in bets; the latter involves a massive leveraged long position of approximately 626,000 ETH, accounting for about 0.5% of ETH's circulating supply. On a higher dimension, the 10-year U.S. Treasury yield rose to 4.27%, reaching a four-month high, re-anchoring global asset pricing and creating significant pressure on high beta risk assets like cryptocurrencies and on-chain leverage structures. This article will analyze and assess the survival space of on-chain prediction markets and the systemic risks of leveraged longs like Trend Research against the backdrop of regulatory pressure and rising interest rates.

Portugal's Firm Action to Close the Window

● Regulatory Timeline and Wording: The Portuguese gambling regulatory authority SRIJ recently issued an order to Polymarket, requiring it to exit the Portuguese market and cease services to local users within 48 hours. The official announcement directly named the platform's political event-related betting, deeming it a violation of the current gambling regulatory framework, and emphasized that this deadline is mandatory and urgent.
● Clear Legal Basis: In its statement, SRIJ cited existing laws, emphasizing that "Portuguese law explicitly prohibits betting on political events," categorizing political predictions as prohibited. This is not only enforcement against a single platform but also a public reaffirmation of the regulatory body's zero-tolerance attitude towards the financialization and gambling of political events.
● Betting Scale and Social Sensitivity: According to a single-source statistic, the Polymarket market related to the U.S. presidential election has already exceeded €103 million in bets. This scale far exceeds that of ordinary niche applications and, in the context of heightened election cycle narratives and public sentiment sensitivity, is likely to be viewed by regulators as a high-sensitivity scenario that could impact public opinion, fair elections, and social stability.
● Significance of the First Direct Ban by an EU Country: Polymarket is facing a direct ban at the EU member state level, rather than a voluntary limitation or self-regulatory adjustment by the platform. This is seen as the first case of a mandatory exit for mainstream on-chain prediction markets within the EU, providing a clear example for other similar platforms: when political events, cross-border retail users, and local compliance gaps overlap, regulatory authorities have the capability and willingness to use the most lethal tool of "shutdown."

Regulatory Squeeze on On-Chain Prediction Markets

Behind this enforcement, the regulatory sensitivity points exhibit multiple overlapping characteristics. On one hand, political events are viewed as high-risk targets with the greatest spillover effects; from election fairness to social emotions, they can be amplified by large-scale monetary bets. On the other hand, Polymarket targets global retail users, bypassing traditional licensed channels through on-chain contracts, making it difficult for both gambling and financial regulators to fit it into existing frameworks. The current gambling and financial rules in the EU appear vague when facing prediction markets; the platform is neither as clear-cut as traditional gambling companies nor can it be fully included under financial derivatives regulation, creating a "gray area" that particularly unsettles regulators in the face of political themes.

After Portugal's decisive action, the market began to reassess the potential chain reactions. One path is for other EU member states to reference SRIJ's approach and impose similar restrictions or even direct bans on on-chain platforms that do not hold local gambling licenses but allow betting on political events; another path is for the platforms themselves to be forced to contract their operations, using geographical barriers to block specific jurisdictions while proactively delisting the most controversial political and election events to secure a longer survival cycle. For developers and early investors, this means that future product designs must incorporate event type grading, strengthen KYC/geographical restrictions, and establish clearer compliance structures; otherwise, once they cross political red lines, the valuations and liquidity tied to them could instantly depreciate under regulatory shocks.

Trend Research's High-Leverage ETH Structure

● Institutional Identity and Operational Path: Trend Research is widely regarded as one of the active large institutional accounts on-chain, recently operating continuously on the lending protocol Aave, using deposited ETH as collateral to obtain additional funds through borrowing, and then using the proceeds to continue buying ETH, forming a rolling leveraged long structure. Its operations show high frequency and continuity, indicating a strong directional bet on ETH's medium to long-term performance.
● Massive Holding Scale: According to high-confidence on-chain data, addresses related to Trend Research hold approximately 626,000 ETH, accounting for about 0.5% of ETH's current circulating supply. This proportion is significant in the highly decentralized public chain assets, meaning a single institution can influence the fund utilization efficiency and sentiment expectations of certain liquidity pools within on-chain protocols.
● Typical Leverage Structure Analysis: Such operations typically follow a similar path: first, the already held ETH is deposited into lending protocols like Aave as collateral, then USDT or other pegged assets or directly ETH are borrowed, and the borrowed funds are converted into more ETH in the spot market or over-the-counter channels to increase overall exposure. This "staking—borrowing—buying again—re-staking" cycle can significantly amplify returns when prices rise unilaterally, but once the market reverses, the leverage ratio and collateralization rate can quickly become risk trigger points.
● Amplifying Effect on Market Structure: When such concentrated and highly leveraged large positions are bound to on-chain lending protocols, their impact extends beyond the profit and loss of a single account. Large collateral amounts can affect the borrowing limits and fund utilization rates of the protocols, pushing up funding rates; and during increased volatility or price declines, if the collateral value approaches the liquidation line, large positions may be forced to reduce their holdings to meet margin requirements, further amplifying price fluctuations in a limited liquidity environment, creating a chain reaction of "price decline—margin pressure—passive selling—further decline."

Shrinking Leverage Survival Space Under Rising Interest Rates

● Time Background and Anchoring Effect of U.S. Treasury Yields: The 10-year U.S. Treasury yield recently rose to around 4.27%, reaching a near four-month high. This rate is viewed as the benchmark anchor for global asset pricing, influencing everything from stock market valuations to corporate financing costs and cross-asset allocation decisions, serving as the core reference for institutions assessing the "risk-free return rate."
● Valuation Squeeze on High Beta Assets: Market analysts point out that "the rise in the 10-year U.S. Treasury yield is suppressing all risk assets." When the risk-free return rate rises, investors naturally demand a higher risk premium for taking on additional risks, leading to an increase in the discount rate in valuation models, which often first pressures tech stocks, growth stocks, and high beta crypto assets including BTC and ETH.
● Strengthening of Negative Correlation Between U.S. Treasuries and Bitcoin: Recent data indicates that the negative correlation between the 10-year U.S. Treasury yield and Bitcoin prices has significantly strengthened. During periods of rapid interest rate increases, BTC typically faces outflow pressure and valuation corrections, with mainstream assets like ETH also under pressure, leading to a cooling of the overall crypto market capitalization and risk appetite, highlighting the high sensitivity of this asset class to interest rate changes.
● Passive De-leveraging Risk for Leveraged ETH Bulls: In a high-interest-rate environment, institutions like Trend Research that maintain large-scale leveraged ETH longs through Aave face multiple pressures. On one hand, both on-chain and off-chain funding costs are rising, increasing the opportunity cost of maintaining leverage; on the other hand, ETH prices are more likely to experience short- to medium-term corrections under macroeconomic headwinds, leading to a narrowing of the value gap between collateral and liabilities, triggering more margin replenishment demands. If the price decline exceeds expectations and the funds for margin replenishment fall short, liquidation bots will sell off collateralized ETH in large amounts according to contract rules, causing passive de-leveraging, and the large scale of their on-chain positions means that such passive actions could further impact market prices.

On-Chain Transmission of Risk Evolution Paths

If we view the regulatory event surrounding Polymarket and the leveraged position of Trend Research as two ends of the same picture, one end represents non-price risks related to political narratives and regulatory compliance, while the other focuses on financial risks from price volatility and leverage structures. The former alters the trading vehicles and funding aggregation methods for certain narratives by cracking down on prediction markets; the latter amplifies the impact of price volatility on the health of on-chain protocols against the backdrop of rising macro interest rates. Regulatory events often weaken investors' risk appetite, causing some funds to withdraw from high-risk tracks, and in a high-interest-rate environment, this change in preference further compounds, reinforcing the market's tendency to de-leverage and amplify volatility effects.

From an on-chain perspective, the potential risk transmission paths can be summarized as follows: prediction markets exit due to regulation, forcing related funds to migrate to other contract platforms or flow back to centralized exchanges, with some liquidity shifting towards derivatives and lending protocols, altering the margin structures and funding rates of these protocols; meanwhile, the combination of high interest rates and regulatory uncertainty prompts some participants to reduce leverage and decrease long-term bets, leading to structural changes in borrowing demand and collateral behavior. In this process, protocols like Aave that carry large positions will have their large position health, liquidation threshold distribution, and fund pool utilization become important windows for assessing systemic risk. In the short to medium term, key indicators to watch include: policy changes and compliance transformation rhythms of prediction market platforms in various regions; collateralization rates and liquidation risk distributions of large positions in mainstream lending protocols like Aave; and the evolution of correlations between the 10-year U.S. Treasury yield path and mainstream crypto asset prices, as these variables will collectively determine the pace of risk release or mitigation in the next phase.

Survival Strategies in the Era of High Regulatory Pressure and High Interest Rates

Portugal's order for Polymarket to exit within 48 hours clearly conveys the regulatory body's high sensitivity towards political event predictions: in the context of heightened election cycles and public opinion battles, predictions on political events are viewed as a high-sensitivity red line, and unlicensed, cross-border, retail-targeted on-chain platforms are particularly likely to become key targets. For the entire sector, this means that compliance costs will significantly increase, requiring ample "regulatory buffer zones" in event screening, regional operations, and compliance structure design; otherwise, a single ban could quickly wipe out billions in betting volume and corresponding valuations.

At the same time, under the anchoring of a 4.27% 10-year U.S. Treasury yield, institutions like Trend Research that maintain large, highly leveraged ETH longs are facing increasingly heavy systemic pressures. The rise in the risk-free rate has squeezed the valuation space for risk assets and raised the funding and opportunity costs of maintaining leverage, risk-return ratios are being repriced. In such an environment, if a single large holder's concentrated position approaches the liquidation edge, their de-leveraging behavior could not only represent individual risk but also become a trigger point for larger market fluctuations.

For ordinary investors, the most direct strategic insights are twofold: first, actively reduce leverage levels, especially when U.S. Treasury yields remain high or continue to rise, avoiding the addition of high leverage on high-volatility assets; second, consider interest rates and regulation as equally important variables as prices, continuously tracking the path of U.S. Treasury yields, policy changes regarding cryptocurrencies and prediction markets in major jurisdictions, and being vigilant about the concentration and health of large on-chain holders in lending protocols, as fluctuations in these concentrated positions often amplify reflections in price and liquidity.

In the coming period, key data to closely monitor includes: changes in the strength of the correlation between the 10-year U.S. Treasury yield and the prices of mainstream assets like BTC/ETH, to assess whether macro constraints on crypto pricing have eased; whether other EU member states will follow Portugal in imposing similar regulations or issuing guidelines on prediction markets, as well as specific adjustments in compliance and regional strategies by platforms. Only by understanding the risk structure under the dual environment of high regulatory pressure and high interest rates can market participants find relatively safer footholds in this round of "the cooling of prediction markets colliding with leveraged gambling."

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