A major cryptocurrency trader lost approximately $8.2 million after making a leveraged bet. $ARC The perpetual trading market collapsed on decentralized derivatives platform Lighter, forcing exchanges to utilize backstop liquidity and trigger automatic deleveraging for risk management.
In a series of posts to X, the platform explained that the whale had built a very large long position over several days, driving up its total open interest. $ARC ($ARC) The market reached about $50 million, but about 600 traders and market makers stood on the other side.
Transactions started to fail $ARCprices fell around 6pm ET on Wednesday. Approximately $2 million of the positions were liquidated on the order book, and the remaining positions were transferred to the writer’s liquidity provider pool (LLP) and processed under the high-risk strategy category.
The platform then enabled automatic deleveraging (ADL). This means that some profitable short traders are partially closed out and the system can safely unwind their positions. At one point, the LLP absorbed approximately $200 million at one point. $ARCthe position was worth about $14.7 million until it was further reduced as the price continued to fall.
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Risk cap limits LP losses to $75,000
Despite the large-scale liquidation, losses for liquidity providers were limited. Reiter said only about $75,000 was affected. $ARC Rather than exposing the exchange’s entire liquidity pool, the market was segregated into separate risk buckets. Short traders who held positions against the whales made profits.
The LLP strategy limits the downside while preserving the upside. sauce: writer
“In the end, a large long trader lost about $8.2 million. $USDC ($USDC), LLP lost 75,000 and the short traders who took the risk by betting on this position profited,” Reiter wrote.
In response to this incident, Reiter added new safeguards to the market. The platform said in a pop-up message on its website that it had introduced a $40 million open interest cap. $ARC And moved the pair under a limited liquidity strategy of around $100,000 $USDC with allocated capital. If liquidity is exhausted, the system automatically moves to ADL to close the risk.
The exchange also said similar caps may apply to other assets.
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Manipulation concerns on decentralized platforms
The incident comes amid concerns over price manipulation on decentralized trading platforms. Last August, four whales were accused of causing the price of Plasma (XPL) tokens on HyperLiquid to skyrocket by nearly 200% within minutes to over $1.80.
In June, DeFi protocol Resupply also suffered a security breach on the wstUSR market, resulting in approximately $9.6 million in losses as a result of attackers manipulating prices through an integration with the synthetic stablecoin cvcrvUSD.
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