Aave’s $1B Whale Unwind: Trend Research Faces $763M Loss as ETH Long Implodes

A massive leveraged wager on Ethereum has turned toxic, leaving crypto trading firm Trend Research with a reported $763 million hole in its books and forcing a chaotic unwind of over 400,000 ETH. The firm, linked to Liquid Capital founder Jack Yi, is aggressively deleveraging on Aave to avoid a liquidation cascade that could trigger a structural crisis for DeFi lending markets.

The $763 Million Burn

Data from on-chain analyst EmberCN reveals the scale of the damage: Trend Research’s long position, built by borrowing stablecoins against ETH collateral on Aave, has erased $315 million in prior profits and cut $448 million into its principal. The total drawdown now stands at approximately $763 million.

As Ethereum plunged below $1,800 earlier this week, the firm’s health factor critically deteriorated. To stave off protocol-enforced liquidation, Trend Research has been forced to dump collateral. According to Arkham Intelligence data, the firm has transferred 411,075 ETH (approx. $850M) to Binance since February 1. These flows represent direct sell pressure in an already illiquid market, with ETH struggling to reclaim $2,085 (-1.2% 24h) as of Saturday morning.

I did call the bottom too early… [we are] managing risk. Jack Yi, Liquid Capital Founder

The Liquidation Danger Zone

Despite the massive sell-off, the risk remains live. Trend Research still holds significant debt on Aave. EmberCN analysis pinpoints the firm’s new liquidation density between $1,509 and $1,708, with a major cluster at $1,560.

This creates a precarious setup for the broader market. If ETH revisits the $1,700 range, Aave’s liquidation engine could be forced to sell the remaining collateral automatically, potentially crashing the price further and leaving the protocol with bad debt. At its peak, Trend Research controlled nearly 10% of the aWETH supply on Aave, effectively making the trading firm a single point of failure for the protocol’s solvency.

Institutional Contagion

The unwinding of Trend Research is not an isolated event but a stress test for DeFi’s over-collateralization model. The firm utilized a recursive leverage loop, depositing ETH to borrow stablecoins to buy more ETH. While profitable during the 2024-2025 run-up, this strategy (often called “looping”), turns lethal during high-volatility drawdowns.

Market makers are now pricing in the overhang of the firm’s remaining ~247,000 ETH collateral. Until this position is fully unwound or re-collateralized, the $1,560 price level acts as a magnetic trigger for further downside volatility.