Whales, Woes, and Wilde: Lighter’s $50M ARC Ballet

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Ah, the theater of finance! Lighter’s LLP model, a masterpiece of restraint, confined its losses to a mere $75K, while some poor darling of a whale parted with $8.2M in a $50M ARC open interest fandango.

In the grand arena of decentralized derivatives, Lighter found itself the stage for a most dramatic spectacle. A whale, no doubt convinced of its own infallibility, attempted to squeeze ARC longs with all the subtlety of a sledgehammer. The affair, as one might expect, unfolded with the elegance of a public X thread, where the team proclaimed it the inaugural test of their LLP strategies. Open interest, that fickle muse, swelled to $50 million USDC as traders flocked to both sides of the market, like moths to a particularly lucrative flame.

Lighter’s LLP: A Safety Net for the Financially Fickle

According to the raconteurs at Lighter, a single trader-let us call him the Baron of Bad Decisions-amassed an oversized long position in ARC over several days. This position, like a poorly tailored suit, became comically large relative to the actual trading volume of ARC. Meanwhile, 600 other traders and market makers, no doubt sensing blood in the water, took the opposite side, shorting with glee.

“We had the first battle test of LLP Strategies in the last several hours. TLDR: it worked as expected and protected LLP holders as well as traders. Deep dive in this thread.”

– Lighter (@Lighter_xyz)

Together, their trades inflated the open interest to a staggering $50 million USDC. As the ARC price began its inevitable descent around 6 p.m. ET, liquidation pressure mounted. The first wave of forced selling closed out $2 million USDC, a mere appetizer for the financial feast to come. The price continued its downward spiral, prompting further reductions of the ill-fated position.

The remaining exposure was then gracefully transferred to Lighter’s LLP system via auto-deleveraging (ADL). ARC perpetual contracts, those darlings of Strategy 7, had a mere $75,000 USDC allocated to them. Only this modest sum faced risk if ADL occurred, a testament to the platform’s prudence.

During the first ADL event, the LLP acquired over 200 million ARC tokens, valued at approximately $14.7 million at $0.072867 per share. For a fleeting moment, the position was profitable, as the price paused in its descent. But alas, losses resumed until the $75,000 allocated to Strategy 7 was entirely exhausted. A second ADL followed, passing the remaining exposure to short traders at a lower price of $0.071123.

Thanks to the system’s design, the LLP could have profited had the price rebounded swiftly. However, its losses were capped at the $75,000 assigned to that strategy. In the end, the LLP lost a mere $75,000, while our unfortunate whale parted with $8.2 million. Short traders, those cunning foxes, emerged victorious.

LIT Soars 8.8% as Whale’s Woes Become Market’s Joy

On-chain analyst Route 2 FI observed that the whale had been adding to its long position at a steady pace of $360,000 per hour, employing a TWAP strategy to avoid moving the price too precipitously. The analyst drew parallels to last year’s JellyJelly incident on Hyperliquid, where a large position triggered volatility and losses. In Lighter’s case, however, losses were contained due to the fixed caps on each strategy pool, preventing the damage from spreading like a financial contagion.

“There’s quite an interesting situation going on at Lighter at the moment. There is a guy that is long $24m of ARC, and he continues to add $360k every hour on TWAP. There are some similarities to the Jelly Jelly incident on Hyperliquid last year…”

– Route 2 FI (@Route2FI)

Short traders, meanwhile, enjoyed robust returns during the drop. Funding rates soared, and those betting against the whale earned around 5% per day, annualized. These high returns attracted more short sellers, making it increasingly difficult for the whale to push the price upward.

According to CoinMarketCap, LIT was trading at $1.48 at the time of writing, up 8.8% over the past 24 hours with $51 million in trading volume. The price increase and strong volume suggest that traders remained unperturbed by the liquidation event, no doubt reveling in the schadenfreude of it all.

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2026-02-26 15:42