Lighter crashes below $4 as Robinhood repricing triggers $7.2M in liquidations
Lighter faces a critical test as traders assess whether strong platform activity can offset the token’s sharp repricing.
Lighter [LIT] has seen a sharp repricing following the immediate impact of the Robinhood narrative supporting price movement.
It rose from approximately $4.00 at the beginning of September to $5.60 on the 24th of September.
This gain of around 40% was after Bitwise launched its Lighter Staking ETP. Though the rally was short-lived, it was primarily boosted by trader anticipation of deeper integration with Robinhood wallets.
On the 30th of September, Lighter took another hit after Robinhood shifted their focus toward BitStamp for eligible U.S. perpetual Futures.
As soon as this was announced, the price broke the $4.00 level of support that had been maintained since the start of September, and the price continued to sell down until it reached $3.6719.
Price then rebounded slightly back to $3.7325. Alongside the decline, LIT’s volume increased by 183% to $204 million during this timeframe. This volume represents the largest sale surge of the period.
A relief bounce remains possible, but $4.00 must be reclaimed to show buyers are returning.
Liquidations amplify the sell-off
The sharp LIT decline spilled into the derivative markets as leveraged traders were forced out of losing positions. Once the price declined further, long positions began closing automatically. This resulted in more downside pressure on the already weakening market.
Notably, total liquidated amounts reached $7.2 million. Longs accounted for approximately $6.9 million, while shorts totaled just $304,091.
Volatility rose above 23%, resulting in nearly 2000 traders getting caught up in the price movement. However, forced selling eventually removes some leveraged risk from the market.
However, if liquidations continue, then there will be continued selling, which in turn would prevent LIT from making a successful rebound to $4.00.
Can LIT recover on clarity?
Meanwhile, Lighter’s underlying activity tells a different story from its price action. For instance, the Lighter Protocol completed approximately $1.6 billion in perpetual trades during the last 24 hours of press time.
However, Open Interest for the protocol was only at about $590 million. In addition, there are fees continuing to be generated on the Lighter Platform, which indicates users continue to use the platform even though they have lost confidence in their tokens.
These two distinctions are significant in this case since the decline in LIT value did not appear to create an equivalent decline in overall activity on the Lighter platform.
If Lighter continues to maintain this level of trading activity and fee generation, then despite the token facing less favorable market conditions, the protocol will remain active.
However, if there is a significant decline in the levels of trading activity on the platform, it would indicate that the downward pressure on the token is having an impact on the protocol’s usage.
Final Summary
- Lighter faces downside pressure after Robinhood opted for BitStamp for its eligible U.S. perpetual futures.
- LIT’s recovery hinges on its activity, with strong volume, Open Interest, and fees supporting stabilization.
