This week, in the Eastern Eight Time Zone, the event of Trend Research's high-position long positions on Ethereum being violently reversed and forced to deleverage has attracted significant attention both inside and outside the crypto community. As one of the leading institutions, Trend had originally accumulated considerable floating profits in the previous phase, but chose to increase directional bets against the backdrop of a continuously weakening market, with ETH retracting more than 60% from its peak. Ultimately, when the price dropped to around $1747, they faced severe losses. This shift from "big profits to forced deleveraging" is not just an individual performance fluctuation; it acts like a magnifying glass, starkly revealing the risk appetite, risk control shortcomings, and cascading mechanisms in the current high-leverage cycle of the crypto market. It serves as a wake-up call for all participants watching the "smart money" of institutions.
From Profit to Loss: Trend's Loss of Control
● From Phase Profit to High Position Increase: During the previous ETH price increase, Trend Research achieved impressive profits through directional long positions and leverage. At the moment of expanding paper profits, they chose to concentrate on long positions at relatively high levels, attempting to amplify the profit curve. This strategy of "using existing profits as a buffer" is often seen as aggressive in a unidirectional rising cycle, but once the trend reverses, the previous safety net can be quickly eroded, and the risk-reward ratio can reset entirely in a short time.
● Public Admission of "Turning Bullish Too Early": Founder Jack Yi publicly admitted that he "turned bullish too early" on ETH, leading to a significant loss of previously accumulated profits. For an institution known for its professional trading and risk control, such self-reflection not only demonstrates a confrontation with the results but also indirectly indicates a clear mismatch between their position management and the actual supply-demand and volatility structure of the market, laying the groundwork for passive deleveraging.
● Background of Price Plunge and Deep Retracement: According to data from a single source, the ETH price recently dropped to about $1747.23, nearing the low range since April of the previous year, with a decline of over 60% from the previous year's peak, resulting in a market cap evaporation of approximately $345 billion. In the context of six consecutive months of negative returns (since September 2025), reducing positions should have been a standard approach, yet Trend maintained and even amplified their long exposure while the trend had not yet stabilized, ultimately being squeezed by the market and forced to deleverage to stem the losses.
● Risk Control and Rhythm Expose Structural Defects: The forced deleveraging of Trend reveals two key errors: first, an underestimation of the persistence of medium- to long-term trend reversals, with their risk model closer to a "pullback perspective" rather than a "bear market perspective"; second, an overly aggressive use of floating profits in position management, treating profits that should have been partially realized as an infinitely consumable risk buffer. The combination of these factors led the institution, under extreme volatility, to fall into the same predicament as ordinary leveraged retail investors, transitioning from high profits to passive liquidation.
Six Consecutive Down Days for Ethereum: Institutional "Self-Rescue Missteps"
● Extreme Environment of Six Months of Negative Returns: According to statistics from a single source, since September 2025, Ethereum has recorded six consecutive months of negative monthly returns, which is an extreme trend among mainstream assets. The price has retracted over 60% from last year's highs, reflecting not only a cooling of on-chain activity and narrative enthusiasm but also indicating that long positions face pressure from being "stuck at high levels" during every rebound, leading trend traders to gradually withdraw, with buyers increasingly concentrated among passive participants trying to escape previous losses.
● High Leverage at High Levels is Like "Self-Rescue Missteps": In such a continuously declining and increasingly volatile environment, institutions choosing to increase leverage at high levels is largely a form of "self-rescue gambling"—hoping to quickly recover previous net value declines through a successful rebound trade. However, when the rebound strength is insufficient to change the downward trend, increasing leverage accelerates the accumulation of losses, turning short-term "self-rescue" into "self-sabotage" from a higher point. Trend's experience is a typical example of this logic.
● Conflict of Mindset Between Reducing Positions in Line with the Trend and Increasing Positions Against It: For most institutions, when net value is under pressure, reducing positions in line with the trend means locking in losses and admitting to LPs and shareholders, "we misjudged this wave," while increasing positions against the trend attempts to convince oneself through technical analysis, on-chain indicators, or macro judgments that "the market is already pessimistic enough, and the risk-reward ratio is appropriate." Trend clearly aligned with the latter camp, choosing to believe in reflexivity and mean reversion, while neglecting the deeper liquidity and emotional exhaustion behind the continuous negative returns.
● Limitations of Single Source Data and Trend Signals: It is important to emphasize that the current statistics regarding Ethereum's six consecutive down days, deep retracement, and some institutional positions largely come from single or limited sources, and specific numbers and paths still require more systematic cross-validation with on-chain and off-chain data. However, even under conservative interpretations, the trend signals conveyed by this round of continuous declines—high-leverage long positions are rapidly losing their survival space in a recession cycle—are already clear enough to warrant heightened vigilance from all participants.
Signals of Leverage Retreat: Misalignment from CryptoQuant's Perspective
● On-Chain Observation of BTC Perpetual Leverage Decline: CryptoQuant CEO Ki Young Ju pointed out while observing BTC-USDT perpetual contract data that the overall leverage level has fallen back to the range before the approval of spot ETFs, indicating that leveraged funds are rhythmically cooling off and exiting the broader derivatives market. This change is reflected not only in the decline of contract open interest but also in the moderation of funding rates and a structural shift in market sentiment from overheating to caution.
● What Returning to the Pre-ETF Range Means: When leverage levels retreat to the range before the approval of spot ETFs, it essentially represents a repricing of past optimistic expectations—those who previously bet on ETFs bringing continuous incremental funds and amplified profits through high leverage are forced by the market to reduce their positions. The cooling of speculative funds weakens the momentum for unilateral price increases or crashes, but it also means that once liquidity further contracts, the remaining high-leverage positions will be more easily liquidated in localized volatility.
● Misalignment Between Trend's Passive Deleveraging and Market's Active Leverage Reduction: Comparing Trend's forced deleveraging with the overall leverage retreat observed by CryptoQuant reveals a clear temporal misalignment: broader leveraged funds have already begun to actively reduce risk exposure after the ETF frenzy subsided, while Trend increased their ETH long exposure against this macro retreat. The result is that when mainstream speculative funds have partially exited, Trend remains at the center of the storm, ultimately facing "delayed liquidation" at the peak of volatility.
● Chain Reaction Effects on Other High-Leverage Entities: This round of retreat is not just a profit and loss issue for one institution; it is also a stress test for all high-leverage participants—including hedge funds, proprietary trading desks, and even retail contract traders. A well-known institution being forced to reduce positions can influence the market through two paths: on one hand, amplifying the panic of "institutions can also hit landmines," leading to more follow-on funds closing positions; on the other hand, intensifying slippage and deep damage under concentrated selling pressure, causing high-leverage positions that were still "holding on" to reach the liquidation line faster, triggering a chain reaction.
From Silver Thursday to ETH Plunge: Commonalities in Leverage Disasters
● High-Leverage Explosion on Silver Thursday: Wang Chun mentioned the historical "Silver Thursday" event while commenting on the current market—where the Hunt family hoarded silver through massive leverage, attempting to create supply tightness and price surges. However, under the multiple impacts of regulatory intervention, increased margin requirements, and sudden changes in market liquidity, high-leverage longs were collectively squeezed, leading to a price collapse and the leverage chain being torn apart from the top down. This is one of the most typical textbook cases of "long squeeze" in traditional financial history.
● Similarities and Differences in the Current ETH Decline: Similar to Silver Thursday, this round of ETH plunge also occurred in an environment where leverage was widespread and sentiment was highly polarized. Institutional longs were forced to reduce or even close positions under price retracement and margin pressure, forming a feedback loop that amplified the decline. The difference lies in the globalization of the crypto market, 24-hour trading, and on-chain transparency, which accelerate the speed of risk diffusion, intertwining information and rumors, leading to more intense and fragmented price reactions.
● Resonance of Liquidity Contraction and Margin Pressure: Whether it is Silver Thursday or the current ETH plunge, the core mechanism points to the same chain: when liquidity contracts due to regulatory changes, shifts in market expectations, or capital withdrawals, the margin buffer for leveraged longs is quickly compressed, and any downward price shock can trigger passive position reductions. As more positions are forcibly liquidated, selling pressure further encroaches on the already thin buying depth, resulting in a "stair-step cliff" in prices, with sentiment rapidly switching between panic and despair.
● Historical Disasters' Current Implications for Crypto Institutions: These cross-era leverage disasters point to a simple yet often overlooked lesson: in markets with high leverage and liquidity heavily reliant on external funds, "surviving" is often more important than "making the most profit." For today's crypto institutions, maintaining a calm assessment of leverage levels, margin safety margins, and market absorption capacity amidst the noise of narratives and data is more critical than any single research perspective.
Changing Off-Chain Winds: ETF, Ark, and Ondo's Hidden Signals
● Transaction Structure of Hong Kong Crypto ETFs: On the off-chain capital level, Hong Kong's crypto asset ETFs recorded a total transaction volume of approximately HKD 88.04 million on a certain trading day, with Huaxia Bitcoin ETF accounting for about HKD 63.2 million (according to a single source), indicating that regional funds remain more concentrated on BTC exposure. Although this scale is still considered corner capital compared to global capital markets, its structural distribution reflects traditional capital's preference for relatively mainstream, more liquid assets in high-volatility environments, rather than riskier altcoins or high-leverage strategies.
● Ark Invest's Repricing Actions: Concurrently, Ark Invest recently increased its holdings of approximately 716,000 shares of Bullish stock while reducing about 119,000 shares of Coinbase (according to a single source). This shift from established exchanges to emerging trading infrastructures reflects, to some extent, traditional capital's repricing of different business models, risk exposures, and valuation logics: transitioning from a model reliant on high trading cycles and retail activity to a new platform that combines market making, infrastructure, and institutional services.
● Ondo Finance's Attempt to "On-Chain" IPOs: Additionally, Ondo Finance launched a global listing service, planning to synchronize US stock IPOs on-chain, building a bridge between traditional equity issuance and on-chain assets. This idea of "showing and trading IPOs on-chain" suggests that in the future, funds will have more frequent liquidity and arbitrage paths between traditional brokers, exchanges, and on-chain protocols, further blurring the boundaries between "on-chain" and "off-chain."
● Indirect Link to ETH Plunge and Leverage Retreat: On the surface, these are all "corner news unrelated to ETH," but when placed in the same temporal and spatial coordinates, they point to a common invisible thread: traditional capital is reassessing the risk-return structure of crypto assets, preferring tracks that are more regulatory, more easily valued, and more closely connected to real-world assets (such as US stock IPOs). When off-chain "new money" is more willing to flow into these more controllable channels, the funds remaining on high-leverage ETH longs will naturally become scarce, amplifying their vulnerability. Once the wind shifts, the speed and intensity of the retreat will exceed expectations.
Before the Next Surge and Plunge, Who Can Exit Alive
Trend Research's forced deleveraging event during this round of ETH plunge clearly reflects the common risk appetite and risk control shortcomings present in current crypto institutions: misjudgment of trend persistence, excessive reliance on floating profit buffers, and "self-rescue gambling" by increasing leverage in a systematic retreat. When these flaws accumulate in a 24/7, highly volatile liquidity market, even the most professional research and sophisticated models cannot fully offset the fatal damage caused by rhythm errors.
This also breaks the myth in many retail investors' minds that "institutions = smart money." In the crypto environment where leverage and extreme volatility coexist, the fundamental difference between institutions and individuals often lies only in the amount of capital and the channels for information acquisition, rather than being inherently smarter. Faced with six consecutive months of negative returns for ETH, the leverage retreat indicated by CryptoQuant, and the subtle shift in off-chain capital trends, even leading institutions may make "humanized" erroneous decisions driven by emotional and performance pressures.
Looking ahead to the next cycle, the overall leverage ratio is likely to exhibit stronger cyclical fluctuations under the multiple influences of tightening regulations, the expansion of ETFs and compliant products, and internal risk control reassessments within institutions: it may be pushed higher again when new narratives and new capital enter, and then concentratedly compressed after regulatory warnings and risk events erupt. The participation model of institutions may gradually shift from a single directional leveraged trading approach to more hedging, neutral, and yield alternative strategies, attempting to reduce tail risk exposure without giving up returns.
For ordinary participants, a more pragmatic insight is: on one hand, always be vigilant about single-source data and unverified on-chain "leaked numbers." For any claims regarding specific loss amounts, selling scales, and repayment paths, one should maintain a reserved attitude and seek multi-source verification; on the other hand, also acknowledge that in such an uncertain market, any decision ultimately must bear its own consequences. Whether following "institutional positions" or betting on so-called insider information cannot replace independent judgment and a clear understanding of one's own risk tolerance.
The next surge and plunge will certainly come, but not all participants remaining in the market will be able to wait for that moment. The real key is not to guess the top or bottom, but to ensure that in every risk retreat, you are still at the table and capable of making the next choice.
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