Lighter stated that its upgraded liquidity pool framework successfully contained auto deleveraging losses within a preset limit during a major market event.
On February 26, the decentralized exchange Lighter announced that its revamped liquidity pool structure withstood a 50 million dollar ARC perpetual long squeeze attempt. Roughly 600 traders moved against a large long position, leading to an 8.2 million dollar loss for the whale involved. The incident marked the first significant stress test for Lighter’s newly introduced LLP Strategies, with liquidity provider losses capped at 75,000 dollars.
First Real Test for LLP Strategies
In a February 17 post on X, Lighter outlined updates to its LLP infrastructure. Liquidity was divided into distinct strategies tailored to different market segments, including real world assets. Risk management, liquidations, and auto deleveraging would now be handled at the strategy level instead of across the entire pool.
That structure faced its first major challenge on February 26. According to the platform, a trader had accumulated a sizable long position in ARC perpetual contracts over several days. Around 600 traders and market makers took the opposite side, driving open interest to 50 million dollars.
ARC perpetual trading was placed under Strategy 7, labeled as a higher risk strategy, with approximately 75,000 USDC allocated. This setup ensured that only that portion of liquidity could be affected in the event of auto deleveraging.
As ARC’s price declined around 6 p.m. Eastern Time on February 26, the large long position was initially liquidated through the order book for about 2 million dollars. Lighter indicated that the LLP was briefly in profit, but continued price weakness exhausted Strategy 7 and triggered another auto deleveraging event at 0.071123. Ultimately, the whale absorbed an 8.2 million dollar loss, LLP forfeited its capped 75,000 dollar allocation, and short position holders who maintained their trades ended up in profit.
ARC Price Volatility Intensifies
The unwinding left a clear mark on ARC’s price performance. Data from CoinGecko shows the token experienced a sharp overnight drop in the early hours of February 27, falling from approximately 0.031 dollars to 0.025 dollars before rebounding to 0.0348 dollars.
At the time of writing, ARC, the token powering the Ryzome agentic AI app store, was down more than 9 percent over 24 hours and nearly 59 percent over the past week. It has declined over 63 percent in the last two weeks and 42 percent in the past month. The token now trades about 95 percent below its January 2025 all time high of 0.62 dollars, with an annual decline close to 88 percent.
The extreme volatility aligns with comments from crypto analyst Simon Dedic, who observed that ARC had fallen roughly 80 percent overnight on trading volumes approaching 400 million dollars, nearly ten times its fully diluted valuation. He noted that prior to the decline, the token had significantly outperformed the broader market and suggested it may have been heavily manipulated.
These concerns mirror wider discussions about transparency and fairness in digital asset markets. Recently, Base co founder Jesse Pollak dismissed claims of behind the scenes price coordination, emphasizing that markets should remain free, open, and fair without intervention from project teams.
