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Sujit Kumar
Mar 11, 2025
by Sujit Kumar

Justin Sun Warns of High Leverage Risks on Ethereum

ethereum high risk

Table of contents

  1. Leverage in Derivatives and DeFi
  2. Recent Market Movements
  3. Looking Ahead
Justin Sun, the crypto billionaire and founder of Tron, has drawn attention to a critical issue on Ethereum: excessive leverage. In a recent tweet, Sun warned that the rampant use of high leverage by traders on both centralized and decentralized platforms could soon implode, resulting in severe losses for protocols and DeFi projects on the Ethereum network.

Leverage in Derivatives and DeFi

Sun pointed out that traders are increasingly employing extreme leverage—sometimes up to 50x or even 100x—in derivative markets like options and perpetual futures. This overextension not only exposes traders to heightened liquidation risks during volatile price swings but also places significant stress on Ethereum-based DeFi protocols that use ETH as collateral. As leverage surges, funding rates could spike, potentially driving traders to short ETH and intensifying downward pressure.

Recent Market Movements

Over the past 24 hours, Ethereum experienced a sharp 15% crash, dropping to $1,811, before rebounding 6% to trade at $1,920. This volatility mirrors Bitcoin’s recent dip below $80,000 followed by a quick recovery, underlining the turbulent market conditions driven by leverage-related risks. A commentator noted that Ethereum’s leveraged exposure now accounts for roughly 11–14% of its $440 billion market cap, with daily liquidation volumes between $50-$70 million—an alarming indicator of risk.

Looking Ahead

Justin Sun’s warning serves as a cautionary note for the Ethereum community. With the potential for massive liquidations looming, the need for the Ethereum team to address and mitigate excessive leverage is becoming increasingly urgent to safeguard the stability of its DeFi ecosystem.

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Justin Sun Warns of High Leverage Risks on Ethereum
Sujit Kumar
Sujit received his Bachelors in Science from the LNMU Darbhanga. He is currently working as a Content Strategist. He has more than three years of professional experience in information systems, security policies, technologies, and Cryptocurrency. He has published 6 books in the area of information security and assurance. He has published more than 50 research articles in leading journals Regarding the Latest and Breaking Crypto News and updates. His research interests include access control, computer forensics, Digital Marketing, Web development, business hacks, player experience, and virtual storytelling.

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