Lighter drops 14% after losing $2 support – More pain ahead for LIT?

Since it touched a high of $4.5, Lighter has experienced massive downside pressure. A week ago, the altcoin attempted an upside movement but was met with a sharp rejection at $3.2. 

As a result, the altcoin’s downside pressure intensified, breaching the $2 support level. As of this writing, Lighter [LIT] traded at $1.86, down 14.31% on daily charts, extending a week-long bearish pressure.

Lighter debuts staking of LIT 

Despite prevailing market conditions, Lighter expanded its market reach by launching staking for LIT on Lighter.

According to the team, users who have staked LIT will have access to the Lighter Liquidity Pool (LLP). Also, for every 1 LIT staked, 10 USDC will be deposited into the LLP.

Thus, the ecosystem will see improvements in the gap between LIT and LLP holders, thereby effectively adjusting risk-adjusted returns.

Most importantly, staking LIT on Lighter will earn yield, thereby incentivizing market players to continue staking.

Interestingly, just a few hours after staking went live, the demand for the services surged significantly. According to Oxjermo, after staking went live on Lighter, the amount staked jumped to 10% of the total circulating supply.

Coupled with that, analysts have experienced different opinions following the launch. One such analyst was Thor, who posited that LIT staking will be a bullish addition, as revenue will rise as MMS pays higher trading fees.

At the same time, the analyst noted that staking could put higher bearish pressure on LIT. This could be the case with TVL facing increased outflows as holders seek to withdraw and buy LIT.

Despite the launch, the market’s bearish trend has continued, as LLP holders withdrew to purchase LIT tokens.

Lighter whale sits on $2.84 million unrealized loss

As Lighter downside momentum persisted, LIT dropped below $2, and whales’ futures losses rose significantly. 

According to Onchain Lens, a whale holding a LIT (3x) long position is now having a floating loss of over $2.84 million.

If the whale chooses to sell at the current rate, he will take losses, and if he continues to hold, a forced liquidation could come his way. 

Another whale also faced the same fate. This whale partially liquidated its LIT (1x) long position, resulting in a $509K loss, according to Onchain Lens.

Despite the rising liquidation threat, this whale still holds the position with the next liquidation price of $1.49. 

Interestingly, these two whales are not isolated cases, as liquidations, especially for longs, have surged significantly. 

On January 15, Lighter saw $2.17 million in long positions liquidated, bringing the total liquidated to $8.7 million. 

Is LIT on the verge of more losses?

Lighter fell on its price charts as investors across the markets panicked and closed positions after a drop below $2.

As a result, the downward momentum strengthened even further. In fact, its Stochastic RSI fell further into the oversold zone, sitting at 2.3 as of this writing.

At the same time, the altcoins’ Relative Strength Index (RSI) dropped to 44, after making a bearish crossover days ago.

With these momentum indicators deep in the bearish zone, they suggested seller dominance and heightened downside momentum.

Therefore, if sellers continue to dominate, LIT is likely to drop further towards $1.5. Conversely, if demand for LIT rebounds, driven by the staking series, it could push it back towards $2.6.

Final Thoughts

• A Lighter whale holding a LIT (3x) long position now sits on unrealized loss of over $2.84 million. 
• LIT staked on Lighter reached a record-breaking 10% of the circulating supply hours after staking went live.