From February 1 to February 5, Eastern Standard Time, Trend Research, a subsidiary of Yili Hua, completed a rare large-scale ETH reduction + deleveraging operation on-chain: reducing 188,588 ETH at an average price of approximately $2263, corresponding to a scale of about $426 million, while repaying about $385 million USDT in loans, directly lowering the overall position's liquidation price range from a higher level to $1576–1682, with a significant concentration around $1640. This series of actions pulled a highly leveraged position back into a relatively safe range and raised a core question in the market: was this a passive defense forced by market conditions, or an active risk control upgrade made in advance? In an environment where ETH liquidity is already tight, to what extent will such a large-scale reduction and loan repayment change market participants' emotions and risk preferences?
On-chain Trajectory of 188,588 ETH Outflow
● Operation Rhythm: From February 1 to February 5, Trend-related addresses transferred a total of 188,588 ETH to Binance, calculated at the then average price of about $2263, totaling in the range of $426–427 million. This portion of ETH was subsequently viewed as a reduction chip, and at the same time, on-chain monitoring showed a significant USDT inflow corresponding to the loan position, used to repay about $385 million USDT, forming a combination operation of “spot reduction + leverage repayment.”
● On-chain Performance: In practical terms, such actions typically manifest on-chain as large ETH transfers from “self-owned addresses to exchange deposit addresses,” often completed in batches of tens of thousands to hundreds of thousands of ETH. On the corresponding lending platform, it can be observed that the collateral ETH scale of Trend-related addresses decreased, while USDT loan balances quickly fell. This means that part of the ETH not only played the role of “selling for cash” but also released originally pledged chips through loan repayment, achieving a systematic reduction in leverage ratio.
● Historical Comparison: Compared to past mainstream institutions' reduction cases, Trend's actions have distinct characteristics in scale and rhythm: first, the practice of transferring nearly 190,000 ETH to a single centralized exchange at once is particularly eye-catching in the current phase of low trading volume and depth; second, the reduction and loan repayment are highly synchronized, rather than delaying repayment and then passively responding to margin calls, indicating a decision-making approach closer to “active deleveraging demonstration” rather than traditional forced liquidation.
Safety Cushion Dropped to $1640 Below Liquidation Price
● Liquidation Range Lowered: According to briefing data, after this operation, the liquidation price range of Trend's related positions was significantly lowered to $1576–1682, with a large number of positions concentrated around $1640. This means that under the same market price decline, some high-risk leveraged positions that could have triggered forced liquidation were actively distanced from the “death line,” gaining a thicker safety cushion.
● Risk Control Logic: From a risk control perspective, Trend's dual operation of “reducing ETH + repaying USDT” essentially sacrifices a portion of upside profit elasticity to exchange for survival space for existing positions. In a phase of increased volatility and weakened liquidity, once liquidation is triggered, it can easily lead to price cascades across multiple platforms, so “surviving” often takes precedence over “earning more.” Such institutions tend to take concrete cash flow actions early in the pressure phase to push the liquidation line down to a range they believe is “not easily touched even in extreme drawdowns.”
● Pressure Limit: Comparing the current main volatility range of ETH, it can be seen that the price still maintains a certain distance from $1576–1682, but in an environment of macro and regulatory uncertainty, the market cannot rule out the possibility of further declines. If the market experiences another sharp drop of 20%–30%, even if Trend has lowered the liquidation line, it may still face dual tests of capital curve drawdown and net value fluctuations. What most institutions can bear is not “absolutely no loss,” but rather in extreme scenarios not being forced to liquidate core chips.
Invisible Impact of Spot Selling Pressure and Lending Chain Reaction
● Pressure on the Spot Level: Trend transferred nearly $400 million worth of ETH to exchanges like Binance in a short time, whether through direct market selling or batch orders, will disturb the buy-sell structure and order depth. During periods when trading volume is insufficient to fully absorb such large flows, the market is more likely to experience amplified slippage and prolonged short-term volatility. However, considering that on-chain data only provides information on fund flows and cannot restore the entire transaction path, it is difficult to simply attribute price fluctuations in a certain phase to Trend's single reduction behavior.
● Transmission in the Lending Market: Deleveraging is also reflected in changes in lending utilization rates and interest rate curves. When large borrowers like Trend concentrate on repaying USDT, the overall utilization rate of the platform declines, and short-term interest rates typically fall as well. On the surface, this alleviates interest pressure on other borrowers, but for high-leverage longs, with ETH price volatility and collateral value shrinking, their pressure on margin maintenance has not disappeared; instead, due to the dual narrative of “price decline + institutional reduction,” they may feel even more emotionally fragile.
● Imitation and Preemptive Action: More critically, there are behavioral signals. When the market identifies that “big players are starting to systematically reduce leverage,” other institutions, especially those similarly reliant on lending and derivatives, may choose to follow suit: some may reduce positions slightly in advance, while others may simply “cut first” before more people act, to avoid being at the tail end of the last round of liquidation. This imitation and preemptive action effect often amplifies the chain reaction of a single deleveraging event in the market.
Emotional Turn from Faith Test to Risk Control Awakening
● Tension of Patience and Belief: Metaplanet CEO Simon Gerovich once commented, “Bitcoin tests investors' patience before rewarding belief.” This statement is equally applicable to ETH and the entire crypto market—during long and tumultuous cycles, prices often first breach expectations and then rebound, with long-term holders having to bear both time costs and net value drawdowns. Trend's choice to actively sacrifice part of its position before the pressure became extreme is itself a reassessment of its risk tolerance amid a “patience test.”
● Reversal of Bull Market Narrative: During the last round of heightened emotions, the mainstream narrative leaned towards “leveraging to bet on trends” and “not increasing positions will be eaten by inflation,” with many institutions willing to continuously increase collateral and raise leverage during price uptrends. Trend's current operation represents another emotional turning point: as macro and regulatory variables increase and return expectations decline, even if they still see the long-term trend, they must convert the impulse to “accelerate to the top” into risk control actions of “slowing down in advance” in the short term.
● Coexistence of Faith and Stop Loss: For institutions, “long-term bullish + phase-based recognition of losses” is not contradictory; the key lies in how to clarify the time dimension within a decision-making framework. They can maintain a firm belief in the ETH ecosystem and asset attributes at the macro level, but at the strategic level, if unrealized losses and leverage accumulate to a certain threshold, they must acknowledge phase-based judgment errors and use part of the losses to secure the qualification for future participation. Trend's deleveraging is more like a typical case of “faith remains unchanged, but positions must change.”
Subtle Shift in Direction Under Regulatory Clouds
● Background of Compliance Uncertainty: Before and after this round of deleveraging, news of the SEC accusing three crypto market makers of market manipulation added another layer of shadow to an already tense crypto liquidity environment. Although the specific details of the cases have not been fully disclosed, the market has begun to anticipate that regulatory scrutiny of high-frequency trading, market making, and liquidity provision will be stricter than ever. This uncertainty directly affects order book thickness and counterparty risk preferences.
● Defensive Instincts in a Stricter Environment: In the dual context of tightening regulation and rising macro risks, institutions like Trend that rely on leverage and lending tools have more motivation to defend in advance and reduce leverage. If the external environment suddenly changes, such as liquidity providers being forced to contract or certain trading channels being restricted, high-leverage positions will be the first to suffer, easily falling into the dilemma of “wanting to reduce but unable to, wanting to borrow but unable to.” Rather than passively responding at that time, it is better to reduce leverage ratios before risks are fully realized.
● Amplifying Effect of Direction Interpretation: These external pressures will compound on an already fragile leverage structure, making a single deleveraging event easily interpreted by the market as a symbol of “directional change”—even if the reality may just be an adjustment of individual institutions. When the market observes Trend's actions alongside SEC dynamics and macro fluctuations, it becomes not just a case of position adjustment but is amplified into a potential signal that “institutions are beginning to overall reduce risk exposure.”
A Demonstration of Deleveraging and the Next Steps for Institutions
In terms of results, Trend's recent reduction of approximately $426 million in ETH and repayment of about $385 million USDT, without triggering extreme risk events, effectively lowered the liquidation price range and substantially compressed its risk exposure. For the ETH market, this action may temporarily increase some spot selling pressure and volatility expectations, and also psychologically pressure other high-leverage participants through deleveraging on the lending side, but based on current information, we cannot and should not simply identify it as the single “culprit” of recent price fluctuations.
The market's divergence around this event can generally be summarized into two routes: one faction believes this is part of phase-based risk clearing, where the proactive contraction of large leveraged funds actually creates space for a healthier upward structure; the other faction worries that this is merely the beginning of a deeper institutional contraction cycle, where more funds will choose to reduce positions and withdraw from high-volatility assets under the combined pressure of regulation and macro factors. Which narrative ultimately prevails will depend on the evolution of funding and policy in the coming months.
Moving forward, key signals to closely monitor include: first, the on-chain adjustment trajectory of Trend and other large holders, to see if there is sustained reduction or reverse accumulation; second, changes in leverage levels and interest rate curves on mainstream lending platforms, to observe whether systemic deleveraging continues; third, regulatory progress surrounding market making, trading, and custody, to confirm whether compliance pressure is a phase-based event or a long-term trend. For all remaining participants, what truly needs to be learned may not be how much ETH Trend sold, but how it reshaped the priority of “surviving” through a demonstration of deleveraging in the face of high volatility and uncertainty.
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