A large crypto trader lost approximately $8.2 million USDC after a heavily leveraged long position in the ARC perpetuals market collapsed on the decentralised derivatives platform Lighter.
The whale built a sizable long over several days, pushing open interest in ARC to around $50 million, while roughly 600 traders and market makers took the opposite short positions.
When ARC’s price dropped around 6:00 pm ET, about $2 million of the position was liquidated on the order book and the remainder was transferred into Lighter’s liquidity provider pool under a high-risk strategy category.
Lighter then activated auto-deleveraging, partially closing profitable short positions to safely unwind risk, with the liquidity provider pool at one point absorbing about 200 million ARC worth $14.7 million before exposure was reduced.
Despite the scale of the trade, liquidity provider losses were limited to roughly $75,000 because the ARC market was isolated in a separate risk bucket rather than drawing from the exchange’s full liquidity pool.
“In the end, the big long trader lost around 8.2M USDC, LLP lost 75k, and the short traders who took the risk of betting against this position were profitable,”
Lighter wrote.
Following the incident, Lighter imposed a $40 million open interest cap on ARC and moved the pair to a capped liquidity strategy with about $100,000 USDC allocated, with automatic transitions to auto-deleveraging if liquidity is exhausted.
The episode adds to broader concerns about volatility and potential manipulation risks on decentralised trading platforms, where large leveraged positions can rapidly unwind and stress market structure.