Crypto Trader Loses $8.2M on Lighter Exchange Amid ARC Market Volatility

A recent incident on the Lighter exchange has highlighted the risks associated with leveraged trading in cryptocurrency markets. A large crypto trader built a significant long position in the ARC perpetuals market over several days, pushing total open interest to around $50 million.

Approximately 600 traders and market makers took the opposite side of the trade, which began to unravel when ARC's price dropped around 6:00 pm ET on Wednesday. The exchange's auto-deleveraging mechanism was triggered to manage risk, limiting liquidity provider losses to about $75,000.

The remaining position worth $6 million was moved into Lighter's liquidity provider pool (LLP), where it was handled under a high-risk strategy category. Unfortunately, the trade failed, resulting in significant losses for the trader of around $8.2 million.