A whale (large trader) recently attempted to squeeze longs in the ARC token perpetuals market on Lighter, a decentralized derivatives and perpetual futures platform.
The effort backfired spectacularly. The whale built a massive leveraged long position over several days, accumulating around 210 million ARC tokens valued at peaks of ~$20M+, pushing the total open interest (OI) in the ARC market to about $50 million.
This was an outsized bet relative to the thin liquidity in the market, with roughly 600 other traders and market makers taking the short side as counterparties. The strategy appeared aimed at forcing shorts to cover; a classic long squeeze by driving the price higher—ARC briefly pumped to around $0.15.
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Funding rates reportedly surged dramatically up to annualized 2100% at points, attracting more shorts who were paid heavily to hold against the long. However, the rally drew heavy selling pressure from other traders and whales; one reportedly profited ~$1.13M by selling into the pump via DCA while still holding some.
When ARC’s price reversed and dropped sharply, the position unraveled: Partial liquidation occurred on the order book ~$2M worth. The rest shifted to Lighter’s Liquidity Provider Pool (LLP) under a high-risk isolated strategy. Auto-deleveraging (ADL) and backstop liquidity kicked in to manage systemic risk.
The whale ultimately lost approximately $8.2 million in USDC. Short-side traders profited significantly from the move. Lighter’s design shone here: Unlike more centralized or vulnerable setups; comparisons to past Hyperliquid incidents, ARC was isolated in a capped “Strategy” bucket.
This limited LLP (liquidity provider) losses to just $75,000, protecting the broader pool and platform from major damage. Post-event, Lighter imposed new safeguards like a $40M OI cap on ARC and moved it to a capped liquidity allocation ($100K).
This event served as a real-world stress test for Lighter’s risk controls (LLP Strategies), highlighting both the dangers of over-leveraged plays in thin markets and how well-designed DeFi perps can contain contagion.
ARC saw a sharp ~75% dump in the aftermath. Traders on Lighter and those long ARC elsewhere faced volatility, with some retail users reporting personal losses from forced exits or liquidations during the pump-and-dump.
The squeeze attempt failed, the whale got rekt, shorts won, and Lighter passed its battle test with minimal platform-side pain. Classic crypto chaos—always size positions carefully in low-liquidity tokens.
Hyperliquid, has experienced several high-profile liquidation incidents and related events since its rise in prominence. These often involve market manipulation, thin liquidity in meme/perp markets, large leveraged positions, and impacts on its Hyperliquidity Provider (HLP) vault.
Hyperliquid has seen more frequent and severe platform-side losses from similar dynamics. Hyperliquid has faced repeated attacks where traders build massive positions, manipulate thin markets especially meme coins, then force liquidations that the HLP vault absorbs, creating bad debt.
A trader manipulated the JELLY token perp, leading to $13.5M unrealized loss for HLP initially. The platform settled at a much lower price ($0.0095 vs. higher on-chain) and delisted. This exposed vulnerabilities in liquidation handling and nearly risked protocol collapse.
Multiple accounts used “self-liquidation” tactics. A whale built a large short ~$250M notional, withdrew margin and collateral, forcing HLP to take over and unwind at a loss of over $4M. Platform denied it was a hack and exploit, but HLP users lost significantly, with TVL dropping sharply afterward.
Third major attack in 2025. Attacker split funds across 19 wallets, opened large longs ($26M–$30M), created a fake buy wall then canceled it to thin liquidity, triggering cascading liquidations. HLP absorbed $4.9M–$5M in bad debt and losses. Platform paused withdrawals and bridge temporarily. Attacker’s own position was wiped.
Other similar events occurred with TST token, marking a pattern of 3+ major manipulation hits in 2025 alone, highlighting risks in handling outsized positions in low-liquidity perps. Hyperliquid often sees outsized liquidations during volatility due to high leverage and volume concentration.
During a broad sell-off, Hyperliquid contributed heavily to ~$19B–$20B total market liquidations. Over 1,000 wallets fully wiped out, 6,300+ in the red, with $1.23B+ trader capital erased on-platform. 205 lost >$1M each; many high-ROI leaderboards destroyed.
Hyperliquid has adjusted, but incidents recur due to its design prioritizing speed and volume over heavy per-market isolation. HLP often takes hits, leading to bad debt or TVL outflows.
In contrast, Lighter’s recent ARC event showed better containment: isolated “Strategy” buckets, OI caps, and LLP losses limited to ~$75K. Hyperliquid’s HLP has absorbed multi-million bad debts repeatedly, sometimes forcing broader measures.
Hyperliquid remains dominant in volume/OI, but these incidents underscore risks in thin perp markets—especially meme tokens—where whales can push squeezes or manipulations that backfire on liquidity providers.