A leveraged Ethereum position built by Jack Yi’s Trend Research continues to unravel under pressure.
The position, built through Aave’s lending protocol and reportedly worth around $958 million in borrowed stablecoins at its peak, has declined through repeated defensive selling as Ethereum’s price falls.
On February 4, Trend deposited an additional 10,000 ETH (approximately $21.2 million) with Binance to sell and repay loans, according to on-chain tracking profile Lookonchain.
The position now holds 488,172 ETH, valued at approximately $1.05 billion at current prices.
The deleveraging began in early February, when Trend sold 33,589 ETH (around $79 million) and used $77.5 million in USDT to pay down debt, pushing the reported liquidation threshold from $1,880 to $1,830.
The February 4 sale marks the latest stage of a controlled pullback aimed at keeping the position above water as Ethereum trades lower.
The market is observing that the mechanics of unwinding a billion-dollar leveraged bet in times of limited liquidity can trigger a cascade that moves the market faster than the flow itself suggests.
What the numbers show
Lookonchain reported that Trend Research expanded its Aave-based leverage to approximately $958 million in borrowed stablecoins, supporting holdings that peaked at approximately 601,000 ETH.
The position used Ethereum as collateral to borrow stablecoins, creating a loop in which falling ETH prices reduced the value of the collateral. At the same time, the debt remains fixed, in a classic long leveraged structure.
Trend has now sold at least 112,828 ETH across multiple transactions since early February. The position fell from around 601,000 ETH to 488,172 ETH, a reduction of around 19%.
At current prices near $2,150, the remaining position is valued at approximately $1.05 billion.
Arkham previously estimated that the position was down about $562 million in unrealized losses when the risk of liquidation first emerged around the $1,800 level. Currently, the position is down $862 million since the end of January.
The data suggests multiple Aave positions with different liquidation thresholds, including a leg at around $1,558, indicating that the structure may be more complex than a single monolithic trigger.
Repeated selling reflects a strategy of anticipating forced liquidation by voluntarily reducing exposure. Each sale pays off the debt, thereby reducing the total outstanding debt and improving the health factor, which is the ratio of the value of the collateral to the value of the debt that determines eligibility for liquidation.
However, each sale also blocks losses and reduces the remaining stake.
How Aave Clearances Really Work
Aave liquidations do not release collateral into the open market in one lump.
Instead, they transfer the collateral to liquidators, who repay part of the borrower’s debt and receive the seized ETH, as well as a liquidation bonus. The liquidators then decide how and where to offload or cover this ETH.
The liquidation process begins when a position’s health factor falls below 1. Aave’s closing factor determines the amount of debt that can be repaid in a single liquidation event.
When the health factor is between 0.95 and 1, up to 50% of the debt can be liquidated. When the health factor drops below 0.95, up to 100% of the position can be liquidated.
This creates two regimes: a step-by-step and manageable process if the position approaches the threshold, or a cliff if the health factor plunges.
The potential liquidation amount depends on the remaining debt. While Trend has managed to reduce its debt through recent sales, the maximum liquidation flow is below the original debt band of $941 million to $958 million.
However, the remaining 488,172 ETH still represents around $1.05 billion in collateral, enough to move the markets if the forced liquidation accelerates.
Ethereum’s 24-hour trading volume is approximately $49 billion. A forced liquidation of even half of the remaining position, or approximately 244,000 ETH or $525 million at current prices, would represent approximately 1% of daily volume.
This seems understandable until two reality checks complicate the calculations.
First, time compression is important. If liquidators need to offload quickly, within minutes or hours, the flow becomes a significant portion of short-term liquidity, even if it is only a small portion of the 24-hour volume.
Second, liquidity is endogenous in times of crisis. During leverage-driven selloffs, liquidity becomes fragile, potentially creating forced flows that move prices more than volume calculations suggest.
Cascade paths
The market impact of a significant Aave liquidation does not come from a single sell order. This happens through three channels which can reinforce each other.
The first is direct assignment and hedging. Liquidators often hedge immediately by shorting perpetual futures contracts, then unwind by selling the seized ETH into spot exchange or decentralized liquidity.
This creates double pressure: short sales on futures contracts and spot sales.
The second is a reflective feedback loop. Spot price declines, Oracle price update and other Aave positions cross the health factor threshold below 1, triggering additional liquidations.
These liquidations put more ETH in the hands of liquidators, who sell or hedge, driving down the spot price. The cycle repeats itself.
The third is narrative and balance sheet pressure. Even outside of DeFi protocols, large holders facing unrealized losses may be incentivized to engage in defensive selling to avoid worse outcomes.
Trend’s repeat sales demonstrate this dynamic.
What to watch
Three indicators indicate whether this is happening in a contained or cascading manner.
First, the behavior of the Aave health factor. Trend’s repeated voluntary sales suggest that the health factor is actively managed and remains above the forced liquidation threshold.
If Ethereum’s decline accelerates and Trend fails to sell off fast enough, the health factor could drop below 1.
Second, where the layout prints. The 10,000 ETH deposit to Binance on February 4 suggests that centralized exchange order books are absorbing the flow. Watch for larger deposits or faster execution windows that could signal panic rather than controlled deleveraging.
Third, the broader liquidation environment. If Ethereum and the broader crypto market continue to experience high forced sales, the same flow exerts greater leverage on prices as liquidity providers withdraw and order books dwindle.
The billion-dollar position at risk is not a simple transaction. This is a test of how DeFi liquidation mechanisms, limited liquidity, and reflexive loops interact when leverage meets stress.
Trend Research’s controlled pullback shows the strategy to stay ahead of the forced liquidation.
The success of this strategy depends on how quickly Ethereum falls and how much liquidity remains in the market to absorb the flow.
