Lighter's LIT Token Skyrocketed 700% in 24 Hours Before Crashing 77%, Triggering $32M in Liquidations

Lighter’s native token, LIT, surged 700% in the first 24 hours of 2026 before crashing 77% in value. The rapid price movement led to $32 million in liquidations from both long and short positions. This volatility highlighted the speculative nature of the token, especially following its airdrop and initial listing. The sharp correction came amid broader bearish sentiment in the crypto market as Bitcoin and other major cryptocurrencies also faced downward pressure.

The airdrop of LIT tokens on December 30, 2025, brought significant attention to the project. Approximately $675 million worth of tokens were distributed to early users and liquidity providers, generating substantial short-term momentum. However, the euphoria faded quickly as airdrop recipients began to sell their allocations. This led to massive outflows, with $250 million in withdrawals recorded within 24 hours. The liquidity pressure was evident as TVL (Total Value Locked) dropped by 20%, reflecting a shift in capital to other opportunities according to recent analysis.

Lighter’s trading platform recorded over $200 billion in 30-day trading volume, making it one of the most active perpetual DEXs.

However, recent data showed a decline in daily trading volumes to as low as $2 billion, raising concerns about the sustainability of the platform’s growth. The TVL-to-market cap ratio of 2.08 suggests the project is securing more capital than its market valuation. While this ratio is often seen as a positive sign, it also indicated the potential for overvaluation in the event of a sudden sell-off.

What Caused the Volatility in LIT?

The rapid price movement in LIT was primarily driven by speculative activity following the airdrop. Whale investors also played a role in early trading, with three large wallets depositing nearly $10 million in USDC to purchase LIT tokens. This accumulation occurred around the time Coinbase announced its plans to list the token. However, as liquidity waned and selling pressure intensified, the price collapsed.

Market observers noted that the LIT token was still in a price discovery phase, with no clear fundamental valuation yet. The token’s utility is tied to the Lighter ecosystem, which operates as a decentralized perpetual exchange. However, the majority of the supply is still locked, with only 25% in circulation. This limited supply, combined with aggressive marketing and airdrop incentives, created an environment conducive to volatility according to market analysis.

What Are the Implications for Lighter and the Broader Market?

The price crash and subsequent liquidations underscore the risks associated with newly launched tokens, particularly in a highly leveraged market. Analysts suggest that the LIT token may remain volatile in the short term, with its performance dependent on on-chain activity and liquidity conditions. If trading volume and TVL remain strong, the token could stabilize, but a bearish trend in the broader crypto market could continue to weigh on its value.

Institutional activity also played a role in the market dynamics. Tether, the company behind the USDT stablecoin, added 8,889 BTC to its reserves during the market correction, reflecting a long-term bullish stance on Bitcoin. While this move was not directly related to LIT, it signaled that some institutional players were still accumulating crypto assets despite the volatility.

Market analysts predict that LIT may see renewed interest in 2026, especially if the Lighter DEX continues to gain traction. However, the token will face competition from other perpetual DEX projects such as Hyperliquid and Aster, both of which experienced price declines following LIT's launch.

What Do Experts Say About LIT's Future?

Crypto analysts remain cautious about LIT’s long-term prospects. While the TVL-to-market cap ratio suggests the project is attracting capital, it does not guarantee a corresponding price increase. The token’s future value will depend on its ability to generate sustainable usage, fee revenue, and ecosystem growth. If the platform can maintain high trading volumes and user adoption, LIT may see further upside. However, if the market remains bearish, price corrections could persist.

The broader crypto market is also undergoing significant changes. Bitcoin is expected to face continued volatility in 2026, with analysts highlighting factors such as Fed rate decisions and potential regulatory developments as key drivers. If the macroeconomic environment becomes more favorable, investors may return to crypto assets, potentially supporting a recovery for LIT and other altcoins.

For now, LIT remains in a speculative phase, with its price heavily influenced by liquidity, market sentiment, and project developments. Investors are advised to monitor on-chain data and institutional activity closely, as these factors will likely shape the token’s trajectory in the coming months.