Lighter down 11% as Spot volume drops 3x – Can LIT’s price recover?

Lighter [LIT] is down more than 11% in the past 24 hours when gauging its price movement from the day’s peak to the low. LIT crashed from $1.663 to $1.4725 with daily sell volume increasing by 20%.

The decline follows a healthy price surge in the past two days. The two-day rally was equivalent to a 50% retracement from the most recent price range where the lower high is at $1.90 and a lower low is at $1.50.

Here is why the token is trading in a downtrend and if it can recover:

Low trading activity of LIT token fuels price decline

Lighter’s price decline was fueled by low trading activity.

Blockworks reported that the number of Daily Active Traders has reduced by 50% over the past week. Numerically, this figure declined from 15,411 to 7,972 and seems to be continuing with this trend.

On the 17th of June, the Spot volume was at $1.738 billion but now trades at slightly above $531 million. This represents a more than 3x decrease over the same period.

Again, LIT’s Spot volume hit a monthly low of $182 million the previous day. This is about 10x below the peak volume seen in the past week, indicating extremely low trading activity.

Combining all this data, the daily revenue has also been taking a hit, declining to $40K. Moreover, capital outflow is increasing, with about 30 trades resulting in $445.3K sell pressure.

Will LIT price action recover?

Lighter’s price has been rising over the last two days in an ascending trend channel. But after hitting $1.70, it formed a reversal pattern with this value being the head.

Usually, a head-and-shoulders pattern suggests a potential bearish reversal. The shoulders were at $1.66 while the neckline traded at around $1.60.

LIT’s price broke below the neckline with the massive red candles confirming the sellers’ momentum. Traders were also increasingly inclined to sell as Open Interest (OI) was rising while price was declining.

Over the past few hours, OI rose from $24 million to above $25 million. Even the wick in the most recent candle confirmed the sell pressure. That could mean LIT’s price may hit $1.50 or lower.

Worth noting, after the breakdown below $1.50, bulls reacted instantly. Even so, the MACD bars turned orange from red, indicating potential exhaustion by bears.

However, for LIT to recover, it needs to stay above $1.50, break above $1.56 and reclaim the neckline as support. Otherwise, bears may prevail, until market conditions change.

Therefore, the decline reflected a broader market weakness across DEX tokens, including Hyperliquid [HYPE].

Final Summary

• Lighter declines 11% in the past 24 hours as Spot volume and number of daily active traders drop sharply. 
• LIT price formed a bearish reversal pattern and has since been declining even though bears have shown signs of exhaustion.