Lighter [LIT], the native token of the decentralized perpetual exchange, has continued to decline in the early hours of the 24th of October, falling roughly 11% as of writing.
The decline comes at a stage where traders in the market, despite the price drop, are positioning bullishly in the spot and perpetual markets. Lighter’s buyback program is setting the asset up for a further rally in the near term.
LIT decline drives liquidations
Selling pressure in the perpetual market has driven LIT’s decline over the past day. Perpetual netflow data shows that traders withdrew $2.4 million from the market in the past 24 hours, indicating that they are reducing their exposure.
Shrinking capital in the perpetual market often reflects some level of uncertainty among investors. The disparity between long and short liquidations reflects the impact of this selling pressure.
According to CoinGlass, long traders have lost roughly 10 times more than their short counterparts, with liquidated capital of $999,000 and $87,000, respectively.
Losses like these show that going long in the perpetual market carries real risks during a decline, which could ultimately force the asset to trade lower in the near term.
Spot buyers remain active
The surge in capital outflows from the perpetual market does not, however, correlate with what is happening across multiple exchanges, according to data from CoinGlass.
The Funding Rate, a key metric for tracking whether long or short positions dominate the market, showed that the former was leading despite shrinking capital inflows.
At press time, the Funding Rate had a positive reading of 0.0055%, confirming the dominance of long positions in LIT’s market.
At the same time, Spot market data shows that while LIT has declined, traders have spent more on accumulating the asset, with roughly $521,009 worth of LIT scooped up from the market.
Accumulation at this level often implies that traders see the current decline as an undervaluation of LIT and are using the opportunity to increase their positions.
Continued buying, coupled with long positioning in the perpetual market, could help keep the price up in the near term.
Buybacks could support a rebound
Lighter’s buyback program could influence LIT’s price performance in the near term. According to DeFiLlama, Lighter has spent roughly $2.2 million purchasing its own token from the market, reducing the supply.
With growing demand, as seen in the spot market, there is a high chance that LIT could stage a rebound. However, other factors would need to align for the rally to occur.
These include market sentiment toward LIT, which is presently neutral according to CoinMarketCap, turning bullish. Additionally, broader market sentiment would need to improve, with more capital flowing into the market. At present, outflows have exceeded inflows.
Final Summary
- LIT fell 11% as perpetual market outflows reached $2.4 million, with long traders recording nearly 10 times more liquidations than short traders.
- Lighter spent $2.2 million on token buybacks, while a positive 0.0055% funding rate and spot market activity could support a potential price recovery.