Liquidity shock? LIT drops 16% after Justin Sun pulls funds from Lighter

LIT, the native token of Lighter DEX, shed over 16% of its value into the weekend. 

The token slipped from $1.38 to a record low of $1.15. The decline followed reports that Justin Sun, the founder of TRON, had withdrawn $40 million from the DEX’s liquidity pool. 

Source: LIT/USDT, TradingView 

According to an on-chain analyst, MLM, Sun withdrew $40.76 million from Lighter LLP on Thursday during the U.S trading session. 

The analyst noted that Sun collectively removed a total of $152 million from the trading platform. This represented 18% of Lighter’s total USDC TVL (total locked value). In response, traders expressed bearish views about the move. This was evidenced by LIT’s sharp sell-off. 

Lighter’s daily outflows hit $155M

A deeper look into the Lighter DEX reinforced the analyst’s findings, with Artemis data flagging a whopping $155.1 million in net outflows on 05 March.

This was the second-highest daily outflow from Lighter after the 10 October crash, which saw $179 million in outflows. 

Source: Artemis 

With over 90% of withdrawals driven by Sun, the community is now worried about his move.

In response, Sun clarified that he was just “rebalancing” his wallets and would deposit the funds back into the LLP. 

“We still hold all LIT purchased and remain bullish on Lighter long term. We are rebalancing wallets and will redeposit into LLP soon.”

It remains unclear whether Sun’s move was linked to the recent SEC dismissal of a fraud case against him and his firms. 

However, it’s worth pointing out that such a massive withdrawal from a liquidy pool doesn’t necessarily mean a trading platform is unsafe. On the contrary, it does affect market depth and could increase slippages, making it risky and volatile to enter or exit large orders. 

Whales hold on to their LIT

Surprisingly though, the recent plunge wasn’t driven by top whales.

Santiment showed that wallets holding 1 million LIT to 1 billion LIT showed no changes in their balance in March, let alone on Thursday – A sign that the recent sell-off was likely driven by retail holders and leverage traders.  

Source: Santiment

It remains to be seen whether these resilient whales will help form a base for LIT to rebound and reverse recent losses. 

Final Summary

• LIT dropped by 16% over the weekend after Justin Sun withdrew over $150 million from the DEX’s liquidity pool. 
• Sun reassured the community that he would deposit the funds again soon.