Lighter plunges 12% – $2.9M in long liquidations trigger panic exits

Lighter’s [LIT] attempted bullish reversal collapsed after broader market sentiment turned bearish. In fact, Lighter faced rejection at $3.99, dropped to a low of $3.22, and then slightly rebounded.

As of this writing, Lighter was trading around $3.4, marking a 12% drop on the daily charts and extending its week-long bearish structure.

Over the same period, the altcoin’s trading volume jumped 45%, suggesting increased activity as traders reduced exposure.

Lighter’s $2.9 million in long liquidation triggers panic exit

LIT’s price drop triggered a wave of long liquidations. According to CoinGlass data, $2.9 million in long positions were liquidated over the past 24 hours.

Usually, when longs are flushed out, it raises selling pressure. Higher selling from here pushes prices lower, raising the liquidation risk even higher. 

The increased liquidation risk pushed many traders to exit their positions. Over the past 24 hours, Lighter saw $87.5 million in Futures outflows, compared to $77.7 million in inflows.

As a result, Futures Netflow plummeted 371% to -$9.7 million. Such a drop in netflow suggested that more capital flowed out of the Futures market than entered it, potentially reflecting traders closing positions rather than opening new ones or expanding existing positions.

Historically, higher outflows create short-term pressure, which often leads to more losses on the charts. 

Spot offers much-needed support

Interestingly, it appears that Lighter’s Spot investors were incentivized by the market slip to buy at a discount. 

On the 12th of October, Spot netflow plunged to -$5 million. The same trend persisted at press time, with the netflow holding around -$720k. 

A negative netflow during the market retracement suggested that more tokens were leaving exchanges than entering them, potentially indicating that investors were moving tokens off exchanges.

Typically, when buyers step in during a period of weakness, they can absorb the available supply for sale. This tends to offer the market support and help prevent further declines.

Can LIT withstand the pressure?

Although buyers have remained active on the Spot, the demand arising from here seems inadequate. As such, the market structure still leans heavily bearish.

The Relative Strength Index (RSI) indicator has dropped to 39 at press time, suggesting that sellers are stronger and have substantial control of the market. Likewise, the altcoin sits below its short-term moving averages, indicating intense bearish pressure.

Taken together, these indicators suggest that the trend is likely to persist. Therefore, if these conditions continue, Lighter could drop below $3.2 again and potentially breach the $3 support level.

But all is not lost, especially with Spot demand holding steady. If buyers continue to hold their ground, LIT could defend $3 and target $4, with its 50-day moving average at $4.1 acting as key resistance.

Final Summary

• Lighter faced rejection at $3.99, then fell 12% to a low of $3.22 before slightly rising to $3.40. 
• LIT’s drop triggered a wave of liquidations, with $2.9 million in longs liquidated, triggering panic selling.