Whale loses $8.2M trying to squeeze thin liquidity ARC market on Lighter

A large crypto trader lost $8.2 million after a leveraged bet on the ARC perpetuals market unraveled on the decentralized derivatives platform Lighter. The exchange had to use backstop liquidity and trigger auto-deleveraging to manage the risk. In a series of posts, the platform explained that the whale built a very large long position over several days. This pushed total open interest in the ARC market to about $50 million. Around 600 traders and market makers took the opposite side. The trade began to fail when ARC’s price dropped around 6:00 pm ET on Wednesday. About $2 million of the position was liquidated on the order book. The remaining position was moved into Lighter’s liquidity provider pool. It was handled under a high-risk strategy category. The platform then activated auto-deleveraging (ADL). This meant some profitable short traders were partially closed so the system could safely unwind the position. We assume the risk parameters prevented further contagion. We should monitor how this affects future liquidity on Lighter. Do you think other platforms have similar risks?