Lighter Drops 14% Following Breach of $2 Support

Lighter Drops 14% Following Breach of $2 Support – More Decline Ahead for LIT?

Lighter (LIT) has faced significant downward pressure recently, falling below a crucial support level of $2. Despite launching a new staking feature aimed at expanding its ecosystem and increasing user engagement, LIT is struggling in a bearish market. Affected by liquidations among major investors and overall market panic, the future of LIT appears uncertain.

Key Takeaways

Lighter's price has fallen by 14.31%, currently sitting at $1.86 after breaching the $2 support mark.
The introduction of LIT staking aims to enhance liquidity and incentivize holders, yet the overall market trend remains bearish.
Major investors (whales) are experiencing significant unrealized losses, increasing the pressure on LIT.
Technical indicators suggest continued downward momentum, potentially leading to further price declines.

Lighter Price Drop

Lighter Launches Staking for LIT

In the midst of challenging market conditions, Lighter has taken a step to expand its reach by introducing staking for LIT tokens. According to the Lighter team, users who stake LIT will gain access to the Lighter Liquidity Pool (LLP). For every 1 LIT staked, an equivalent of 10 USDC will be added to the LLP, aiming to enhance the balance between LIT holders and LLP participants.

This staking initiative not only offers the potential for yield earnings but also encourages users to continue staking. Notably, shortly after the launch, demand surged, with the amount staked increasing to 10% of LIT's total circulating supply.

Analysts have varied opinions regarding the implications of staking. Analyst Thor stated that staking could attract bullish support, suggesting that higher revenue would stem from increased trading fees. However, there is concern that staking might lead to additional bearish pressure as total value locked (TVL) experiences outflows as holders may choose to withdraw and purchase LIT.

Lighter Whale Faces $2.84 Million Unrealized Loss

Continued downside momentum has pushed LIT below $2, resulting in escalating losses for major investors. According to Onchain Lens, one whale holding a long position in LIT (3x) is currently facing an unrealized loss exceeding $2.84 million. Selling at the present rate would lock in losses, while continuing to hold might result in forced liquidation.

Another whale partially liquidated its LIT (1x) long position, incurring a loss of $509,000. Despite this, they still hold their position, with the next liquidation price set at $1.49.

Lighter Whale Losses

Recent data shows that liquidations, particularly for long positions, have increased sharply. On January 15, Lighter experienced $2.17 million worth of long positions being liquidated, adding to a total liquidation tally of $8.7 million.

Lighter Liquidation Summary

Is LIT Facing More Losses?

The recent price decline has caused widespread panic among investors, leading to increased position closures after LIT fell below $2. As a result, downward momentum has intensified, with the Stochastic RSI dropping further into the oversold zone at 2.3.

Alongside, the Relative Strength Index (RSI) dipped to 44 following a bearish crossover earlier.

LIT Technical Indicators

These momentum indicators, situated deep in bearish territory, point towards seller dominance and a heightened potential for further declines. If selling pressure continues, LIT could gravitate towards $1.5; conversely, an uptick in demand, possibly spurred by the staking feature, may propel the price back towards $2.6.

Conclusion

The outlook for Lighter (LIT) remains precarious in a challenging market environment. Though the staking initiative is a strategic move to encourage participation and liquidity, ongoing bearish trends pose serious questions about LIT's immediate future. Investors should remain vigilant as market dynamics could shift quickly in the coming days.