The Risks of Leverage in Crypto: Lessons from Huang Licheng's ETH Liquidations

The allure of leverage in cryptocurrency trading is undeniable. For traders seeking to amplify returns in a volatile market, borrowed capital offers the promise of exponential gains. Yet, as the case of Huang Licheng-a prominent Ethereum (ETH) trader known as "Machi Big Brother"-demonstrates, the risks of over-leveraging are severe and often catastrophic. Between late 2024 and 2025, Huang's leveraged ETH positions faced multiple liquidations, erasing tens of millions in value. His story underscores the perils of mismanaging leveraged exposure in an asset class prone to extreme price swings.

The Anatomy of a Liquidation

Huang's most notable loss came from a 25x leveraged long position in ETH, which peaked at $15 million in value. According to a report by Phemex, this position was liquidated when ETH prices fell below $3,062.99, triggering a total loss of $15 million. Another incident, detailed by MEXC, saw his account wiped out entirely, leaving only $15,538 in balance and a cumulative loss exceeding $20.23 million as reported by MEXC. These events highlight the compounding risks of high leverage: not only does it magnify gains, but it also accelerates losses during adverse price movements.

Huang's strategy initially appeared prudent. He built a long ETH position at $2,840 with $500,000, later rolling over the position to increase leverage and raise the liquidation price threshold to $3,000. However, when ETH prices plummeted below this threshold, his position was liquidated, reducing its value to $730,000. This sequence of events illustrates a critical flaw in leveraged trading: even small miscalculations in market timing or volatility can lead to ruin.

Market Volatility and Strategic Adjustments

The crypto market in late 2025 was marked by sharp corrections and liquidity crunches.

Huang's partial closure of a $4.81 million ETH long position on December 1, 2025-liquidated at $2,792 for $1.11 million-reflects the broader volatility. RootData noted that Huang's remaining exposure stood at $11 million, with a liquidation price near $3,010 as reported by MEXC. These adjustments, while reactive, underscore the necessity of dynamic risk management in leveraged trading.

Huang's actions also reveal the psychological toll of leverage. Traders often overestimate their ability to predict market direction or manage margin calls. For instance, his earlier loss of nearly the entire $115,000 long ETH position, leaving just $7,000, exemplifies how leverage can erase years of gains in a single session.

Lessons for Leveraged Position Management

Huang's case offers three key lessons for investors:

1. Leverage is a Double-Edged Sword: While it can amplify returns, it also increases the likelihood of margin calls and liquidations. Traders must balance ambition with prudence, ensuring their leverage ratios align with their risk tolerance.

2. Margin Management is Critical: Rolling over positions to adjust leverage or liquidation thresholds requires precise timing. Huang's attempt to raise his liquidation price to $3,000 failed when ETH prices fell below this level, wiping out gains.

3. Volatility Demands Flexibility: Crypto markets are inherently unpredictable. Huang's partial closures and strategic reductions in exposure highlight the need for adaptive strategies, such as hedging or diversifying across asset classes.

Conclusion

Huang Licheng's ETH liquidations serve as a cautionary tale for leveraged traders. The crypto market's volatility, combined with the exponential risks of borrowed capital, creates a high-stakes environment where even seasoned traders can falter. For investors, the takeaway is clear: leverage should be wielded with discipline, not hubris. As the adage goes, "Only risk what you're willing to lose"-a principle that becomes even more vital when trading on margin.