A large crypto trader suffered an estimated $8.2 million loss on a leveraged long position in the ARC perpetuals market on the decentralized derivatives platform Lighter. The event unfolded on Wednesday evening ET as the price of ARC began to slide, triggering a cascade of liquidations.
The trader had built the oversized position over several days using a Time-Weighted Average Price (TWAP) strategy, adding roughly $360,000 per hour. This aggressive accumulation pushed the total open interest (OI) for ARC on Lighter to approximately $50 million, with around 600 other traders and market makers taking the opposing short side.
When the ARC price declined, an initial wave of liquidations cleared about $2 million from the order book. The remaining, larger portion of the whale's position was then shifted into Lighter's Liquidity Provider Pool (LLP) under a specific high-risk strategy bucket, triggering the platform's auto-deleveraging (ADL) mechanism. This process partially closed profitable short positions to unwind the exposure.
At its peak, the LLP briefly held over 200 million ARC tokens, valued at roughly $14.7 million. However, due to Lighter's capped-risk model, the specific strategy (Strategy 7) allocated to ARC perpetuals had only $75,000 in USDC designated to absorb losses. Once this capital was exhausted, a second ADL event transferred the remaining exposure to short traders at a lower price. In the end, LLP losses were contained to the capped $75,000, successfully protecting the broader pool of liquidity providers.
In response to the event, Lighter has implemented new guardrails, including a $40 million open interest cap on ARC markets and the establishment of a capped-liquidity strategy with about $100,000 USDC allocated, designed to transition to ADL if liquidity is depleted. The platform's native token, LIT, saw a positive market reaction, rising 8.8% amid the event, suggesting trader confidence in the platform's risk management.
