Justin Sun says Ethereum faces major problem, could cause protocol losses
Sun calls Ethereum development team for prompt action
TRON founder Justin Sun has issued a stark warning to the Ethereum community, urging its developers to address a mounting leverage issue before it reaches a tipping point.
Excessive leverage in ETH-based trading—particularly in derivative markets such as options and perpetual futures—is rapidly increasing, posing significant risks to decentralized finance (DeFi) protocols and users alike.
Excessive leverage in focus
Traders on major platforms are now frequently employing leverage of up to 50x, and in some cases even 100x, when trading Ethereum. This aggressive borrowing allows traders to amplify gains during favorable market conditions.
However, the downside becomes evident when price volatility spikes, potentially triggering a cascade of liquidations that could devastate both individual accounts and the broader ecosystem.
“It would be better to intervene early and resolve some of the leverage rather than wait for it to implode,” Sun stated, emphasizing the need for a negotiated solution among stakeholders.
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Implications for DeFi and beyond
The concern extends beyond individual losses. The systemic impact could be severe if these liquidations lead to a broader market downturn, thereby eroding confidence in Ethereum-based DeFi projects. Such an outcome might not only harm protocol stability but also slow the momentum of innovation that has propelled Ethereum to the forefront of blockchain technology.
Sun’s call for prompt action resonates with a growing number of market participants who fear that unchecked leverage could undermine the very foundation of the decentralized financial system.
Crypto industry reaction
As regulators and industry leaders continue to scrutinize high-risk trading practices, the spotlight now turns to the Ethereum development team. Their ability to implement measures that effectively manage leverage levels could prove pivotal in stabilizing the market.
Investors and DeFi enthusiasts will be watching closely to see if early intervention can avert potential crises, safeguarding both protocol integrity and user assets.
We also wrote earlier that SEC and Justin Sun seek court pause to explore resolution in crypto case.
