Inside Lighter’s New Strategy System First Big Test: Dealing with $50 Million in ARC Perpetual Volume

Lighter reported that the enhanced liquidity pool system successfully limited ADL losses to a predetermined threshold.

On February 26, Lighter, a decentralized crypto exchange, announced that its upgraded liquidity pool system had successfully resisted a $50 million ARC perpetual long squeeze attempt.

This happened after about 600 traders flipped a whale position, resulting in an $8.2 million loss, and the episode tested Lighter’s newly launched LLP Strategies, limiting downside risk for liquidity providers to just $75,000.

LLP strategies face the first stress event

In a February 17 post on X, Lighter announced changes to the LLP infrastructure, splitting liquidity into separate strategies for different market types, including risk-weighted assets. Risks, liquidations and automatic deleveraging are now handled at the strategy level instead of across the entire pool.

That structure was confronted with what the platform was called its “first combat test” on February 26. According to Lighter, one trader built up a large long position in ARC perpetuals over several days, with about 600 other traders and market makers taking the short side and bringing the total open interest to $50 million.

ARC offender trading was assigned to Strategy #7, a high-risk strategy with approximately $75,000 of USDC allocated. Lighter said this only meant that some LLP deposits could be exposed if automatic deleveraging were to take place.

When ARC’s price fell around 6:00 PM (ET) on February 26, the large long position was liquidated first on the order book for approximately $2 million. Lighter said LLP initially made a profit on the position, but strategy No. 7 was further exhausted, creating a new ADL at 0.071123. In the end, the whale lost about $8.2 million, LLP lost its $75,000 capped allocation, and short traders who held their positions were profitable.

ARC price collapse

The unwind left visible scars on the ARC price chart, with data from CoinGecko showing that the token experienced a flash crash in the early hours of February 27, from around $0.031 to $0.025, before recovering to $0.0348.

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At the time of writing, ARC, which powers the Ryzome agentic AI ‘app store’, was down more than 9% in 24 hours and almost 59% in seven days. The token has also lost more than 63% of its value in the past two weeks, and is down 42% in 30 days. The stock is currently 95% below its all-time high of $0.62 in January 2025, after falling nearly 88% over the past year.

This turbulence is consistent with observations by crypto commentator Simon Dedic noted that ARC’s value had fallen by approximately 80% overnight on volumes approaching $400 million, which was almost ten times its fully diluted valuation.

Dedic pointed out that the token was “massively outperforming” before the dumping despite a weak market, even suggesting that it was “heavily manipulated.”

The concerns raised by Dedic reflect a broader industry debate about market integrity. Just last month, Base co-founder Jesse Pollak rejected the idea of ​​behind-the-scenes manipulation, stating that his team will not coordinate or deploy capital to influence prices because markets “deserve to be free, open and fair.”