The Strategic Risks and Opportunities in Large-Scale ZEC and ETH Short Positions on Hyperliquid

The crypto derivatives market in late 2025 has become a battleground for leveraged bets, with Hyperliquid emerging as a key platform for high-stakes positioning. Among the most scrutinized strategies are large-scale short positions in Zcash (ZEC) and Ethereum (ETH), where traders are navigating a volatile landscape of rapid price swings and leveraged exposure. This analysis examines the evolving positioning strategies of top short sellers, their behavioral patterns, and the broader market implications of their actions.

ZEC Short Positions: A High-Risk Gamble

The largest ZEC short position on Hyperliquid has become a cautionary tale of leveraged trading. As of November 2025, this position-opened at $360 in October with 10x leverage-faced an unrealized loss of over $22.04 million as ZEC surged past $700, reaching an all-time high. The trader, identified by a single address, continued to add to the position in a bid to average down costs, despite mounting losses. By mid-November, the floating loss had ballooned to $21.5 million, with the position size expanding to $37.5 million.

This strategy highlights a critical behavioral risk: the compounding effect of leverage during upward price trends. The position's liquidation price of $886 by late November underscored its fragility. While the trader briefly saw a peak unrealized gain of $3 million in early December, the position reverted to losses as ZEC's rally continued. Such erratic outcomes reflect the inherent instability of leveraged shorting in a bullish market.

ETH Short Positions: Divergent Strategies and Outcomes

In contrast to the ZEC saga, ETH short positions on Hyperliquid reveal a spectrum of outcomes. A $47.21 million ETH short position yielded a 223% unrealized gain as the price dropped from $4,015 to $3,573. However, another trader's 50,000 ETH short position, initially profitable by $26 million, turned into a $716,000 loss after doubling down during a price surge. These divergent results underscore the dual-edged nature of leveraged shorting.

Abraxas Capital, a top ETH short seller, exemplifies strategic adaptability. The firm reduced its ETH short exposure from $267 million to $138 million in November by closing 22 positions, capitalizing on a leverage reset in the broader market. Meanwhile, the second-largest loser on Hyperliquid liquidated a 6x leveraged long ETH position, incurring a $10.28 million loss before pivoting to a short position. These shifts reflect a broader trend of traders recalibrating risk as market conditions evolve.

Behavioral and Market Implications

The actions of these top short sellers have significant implications for market dynamics. First, the persistence of large ZEC short positions, despite losses, signals a psychological bias toward averaging down-a strategy that can exacerbate losses if the trend continues. Second, the volatility in ETH shorting highlights the role of leverage in amplifying both gains and losses. For instance, a $37 million ETH long position using 25x leverage, funded by $8 million in USDC, illustrates the extreme risk of over-leveraging.

On a macro level, the leverage ratio for Ethereum on Binance reached a historically high 0.579 in November 2025, indicating heightened vulnerability for long positions. This environment increases the likelihood of cascading liquidations, as seen in a 24-hour period where $514 million in positions were wiped out as BTC and ETH gave back gains. Short sellers, particularly those with large ETH exposure, may benefit from such volatility but face counterparty risks if market sentiment reverses.

Conclusion

The strategic risks and opportunities in large-scale ZEC and ETH short positions on Hyperliquid reveal a complex interplay of behavioral biases, leverage, and market dynamics. While some traders capitalize on short-term price drops, others face catastrophic losses when trends defy expectations. For investors, the key takeaway is the importance of risk management in leveraged trading. As the crypto market continues to mature, understanding these positioning strategies-and their implications-will be critical for navigating the next phase of volatility.