The High-Stakes Gamble: Huang Licheng's Crypto Losses and the Lessons in Risk Management

In the volatile world of cryptocurrency trading, the story of Huang Licheng-often referred to as "Buddy" or "Brother Whale"-has become a cautionary tale. Over the past year, Huang's aggressive use of leverage, lack of diversification, and failure to implement stop-loss strategies have led to staggering losses, including a $115,000 paper loss on a 25x leveraged Ethereum (ETH) position in November 2025 and an $8.66 million loss on a 5x long position in the PUMP token according to reports and according to analysis. These missteps highlight systemic risks in leveraged crypto trading and underscore the importance of disciplined risk management.

The ETH Debacle: Leverage as a Double-Edged Sword

Huang's ETH trading strategy epitomizes the dangers of over-leveraging. In November 2025, he increased his ETH long position to 25x leverage, amassing a notional exposure of $5.32 million with an entry price of $3,024 and a liquidation price of $2,908 according to reports. Just two weeks later, the position had already recorded a 23.98% unrealized loss of $48,344 according to data. This escalation followed a broader October crash that wiped out $12.56 million from his holdings according to market reports.

The use of 25x leverage-a level far beyond the recommended 1–3x for most traders-exposed Huang to extreme volatility. As noted by industry analysts, high leverage amplifies both gains and losses, but in a market where price swings of 10% or more are common, such strategies are inherently unstable. Huang's failure to employ stop-loss orders or reduce exposure during downturns compounded his losses, leading to a forced liquidation scenario that eroded his capital.

PUMP and FRIEND: The Cost of Concentration Risk

Huang's losses extend beyond ETH. His 5x long position on PUMP tokens resulted in an $8.66 million paper loss, while his investment in FRIEND tokens-purchased for $15.6 million in May 2024-now holds just $310,000 in value, a $15 million loss according to analysis. These outcomes reflect a lack of diversification, a core principle of risk management.

According to best practices, crypto portfolios should allocate no more than 1–2% of capital to any single trade according to industry standards. Huang's concentrated bets on speculative tokens like PUMP and FRIEND, however, left him vulnerable to asset-specific risks. As K33 Research's Vetle Lunde observed, leveraged positions in low-liquidity assets can trigger cascading liquidations during downturns, exacerbating market declines. Huang's case illustrates how overexposure to a few tokens can turn a single bad trade into a portfolio-wide catastrophe.

Systemic Risks and the Broader Market

Huang's struggles are not isolated. The recent quarter has seen record-high leverage in crypto markets, with open interest in Bitcoin perpetual futures surging by $33 billion according to market data. Retail traders, in particular, have embraced leveraged speculation, often without the safeguards used by institutional investors. This trend has created a fragile ecosystem where margin calls and liquidations can amplify downward price spirals.

For example, the "high leverage without rebound" scenario-where leveraged longs are liquidated without a market recovery-has become a recurring theme. As one expert noted, "Leveraged gamblers are buried when the market turns, while institutions with hedged positions walk away unscathed." Huang's losses, therefore, are a microcosm of broader systemic risks in a market still grappling with maturity.

Best Practices vs. Huang's Approach

To contrast Huang's failures, consider the following risk management best practices:

1. Diversification: Spread investments across large-cap coins (e.g., BTC, ETH), mid-cap altcoins, and stablecoins. A 2025 allocation model suggests 40% in large-cap assets, 30% in mid-cap, 15% in stablecoins, and 15% in high-risk/high-reward projects according to industry research.
2. Position Sizing: Limit single-trade exposure to 1–2% of total capital to prevent catastrophic losses according to risk management guidelines.
3. Stop-Loss and Take-Profit Orders: Automate exits at predefined levels to remove emotional decision-making. For example, a trader buying ETH at $3,000 might set a stop-loss at $2,850 and a take-profit at $3,300 according to trading strategies.
4. Cold Storage: Store 95% of assets in hardware wallets to mitigate exchange hacks according to security best practices.
5. Dollar-Cost Averaging (DCA): Invest fixed amounts regularly to smooth out volatility according to market analysis.

Huang's approach-concentrated, leveraged, and unguarded-stands in stark contrast to these strategies. His reliance on 25x leverage and lack of stop-losses exemplify the pitfalls of ignoring foundational risk principles.

Conclusion: A Lesson in Discipline

Huang Licheng's losses are a stark reminder that crypto trading is not a game of luck but a test of discipline. While leverage can magnify gains, it also magnifies the consequences of poor decisions. As markets evolve, traders must adopt strategies that prioritize preservation over speculation. For every $115,000 loss like Huang's, there are countless retail investors who could learn to avoid similar fates by embracing diversification, position control, and automated risk tools.

In a market where volatility is the norm, the difference between survival and ruin often comes down to one question: Are you trading with a plan-or chasing a dream?