Paus Crypto Reduces Leverage to Manage Liquidation Risks

An interesting event occurred in the cryptocurrency market when a large asset holder made a strategic decision to manage their leverage. This investor chose to reduce the leverage on their on-chain position to avoid a liquidation trap, highlighting the importance of risk management in leveraged crypto trading.

Sudden Drop and Its Impact

According to data from ChainCatcher, the investor faced a significant loss of approximately $230 million when their Ethereum position on Hyperliquid was liquidated three days ago. This event happened after a rapid decline in ETH prices. On January 27, the investor had purchased 148,000 ETH at an average price of $2,883 per coin using leveraged funds, with a total investment value of around $426 million. However, when ETH's price plummeted to about $2,200, their merged contract position on Hyperliquid was immediately liquidated, leaving their on-chain leverage in a dangerous state.

Rescue Strategy and Leverage Adjustment

In response to this critical situation, the investor actively reduced leverage by selling approximately 50,000 ETH worth $112.8 million over two days. This strategy proved effective in lowering the overall liquidation threshold from a very low level to around $1,600 per ETH. By decreasing the position size, the investor successfully reduced liquidation pressure and created a larger safety buffer for their holdings.

Current Asset Holdings and Positions

Recent data shows that the investor still maintains a very large portfolio. Their on-chain holdings include about 33,000 BTC and 748,000 ETH, with a total asset value of approximately $4.213 billion based on current prices. With BTC trading at around $68,020 and ETH at $1,990, this position remains one of the largest in the cryptocurrency market, despite significant fluctuations. The leverage adjustments indicate a more conservative approach by the investor in navigating market volatility.