Lighter: How incentive exhaustion cut LIT’s dominance to 8.1%

Lighter’s [LIT] dominance in DeFi perpetuals peaked near 60% in mid-December 2025, reflecting strong post-launch momentum. That surge followed its airdrop-driven activity spike and aggressive liquidity incentives.

However, as incentives normalized, participation cooled, and volumes retraced sharply. By January 2026, sector-wide contraction intensified pressure, while total daily perp volume fell toward $15–20 billion, down roughly 30% year-over-year.

As Lighter’s share declined, Hyperliquid [HYPE] regained ground, climbing back toward 40–50% control. This rotation reshaped competitive dynamics, while Paradex and DYDX captured incremental flows during volatility spikes.

Although Lighter briefly recovered in early February, its share slipped again toward 25%, signaling fading speculative momentum.

Even so, Lighter maintains structural depth in Bitcoin [BTC] and Ethereum [ETH] contracts, holding over 50% of Open Interest in key pairs.

Thus, while headline volume softened, its core liquidity base remains resilient amid tightening macro conditions and reduced incentive-driven trading.

Hyperliquid’s rise through Lighter’s liquidity drain

Lighter captured nearly 60% share in late 2025 because of zero fees and a looming airdrop concentrated flow on one venue. That incentive stack pulled in short-horizon traders, so volumes surged as leverage appetite expanded.

As 2025 closed, sector turnover hit $7.9 trillion, and Lighter briefly displaced Hyperliquid in daily activity. Then the catalyst flipped. The  LIT airdrop on the 30th of December converted “trade for points” demand into “sell and leave” behavior.

As LIT dropped 45% by mid-January, yield-driven wallets unwound, which reduced repeat volume and thinned sticky participation. As that cohort exited, Lighter’s share compressed toward 25% and later slid to about 8.1% by mid-February as rankings reshuffled.

At the same time, the market expanded faster than Lighter could retain flow. Total perps volume doubled to $14 trillion in six months, so any slowdown translated into rapid share dilution.

Hyperliquid absorbed the migration with a 23.4% share and a 70% Open-Interest grip, while Aster and EdgeX siphoned additional flow through latency, rebates, and fresh incentives.

Liquidity outflows had already weakened Lighter’s position when large token movements began to surface. After the airdrop, volume fell, and market share dropped from 60% to single digits. As that decline unfolded, focus shifted from exchange competition to token positioning.

That shift became clearer when Tron’s founder, Justin Sun, moved nearly 10 million LIT into exchange hot wallets. Arkham data shows 7.212 million LIT was sent through one route, followed by another 5 million through a second deposit path.

Around the same time, other wallets added 1–2 million LIT into the same infrastructure. This clustering signaled preparation for fast execution if volatility increased. Once funds reached hot wallets, transparency reduced while sell-side optionality increased, which pressured sentiment.

Meanwhile, Wintermute built LIT inventory, reinforcing expectations of higher activity. In contrast, HTX routed 6.5 million LITs into the zkLighter infrastructure, indicating ecosystem provisioning rather than immediate selling.

Taken together, Sun’s positioning reflects strategic flexibility, supporting Lighter’s recovery narrative while retaining execution readiness if market conditions deteriorate.

Final Summary

• Incentive exhaustion and post-airdrop exits drained Lighter’s speculative flow, enabling Hyperliquid to absorb liquidity and seize structural derivatives leadership.

• Whale routing and market-maker inventory builds signal hedged positioning, balancing ecosystem support with execution readiness amid Lighter’s fragile recovery phase.