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

The dominance of Lighter’s [LIT] in DeFi perpetuals peaked around 60% in mid-December 2025, showcasing strong momentum post-launch. This surge came after a spike in activity driven by airdrops and aggressive liquidity incentives.

However, as the incentives normalized, participation waned, and volumes saw a significant decline. By January 2026, the sector-wide contraction intensified, with total daily perpetual volume dropping to $15–20 billion, marking a 30% decrease from the previous year.

Source: Laevitas/ X

With Lighter’s share declining, Hyperliquid [HYPE] started regaining ground, climbing back to a 40–50% control range. This shift in dominance reshaped the competitive landscape, with Paradex and DYDX capturing additional flows during volatility spikes.

Despite a brief recovery in early February, Lighter’s share slipped again to around 25%, indicating a decrease in speculative interest.

Nevertheless, Lighter still holds a strong position in Bitcoin [BTC] and Ethereum [ETH] contracts, commanding over 50% of Open Interest in key pairs.

Therefore, while headline volume has softened, Lighter’s core liquidity base remains resilient amidst changing market conditions and reduced incentive-driven trading.

Hyperliquid’s rise amidst Lighter’s liquidity decline

Lighter’s dominance peaked at nearly 60% in late 2025 due to zero fees and a significant airdrop that concentrated flow on one platform. This attracted short-term traders, leading to a surge in volumes as leverage demand increased.

By the end of 2025, sector turnover reached $7.9 trillion, with Lighter briefly surpassing Hyperliquid in daily activity. However, the dynamics shifted when the LIT airdrop on December 30th converted demand from “trade for points” to “sell and leave,” causing a 45% drop in LIT price by mid-January.

As yield-driven wallets unwound, Lighter’s share decreased to 25% and later plummeted to around 8.1% by mid-February as rankings reshuffled.

At the same time, the market expanded rapidly, outpacing Lighter’s ability to retain flow. Total perpetual volume doubled to $14 trillion in six months, leading to a rapid dilution of Lighter’s market share.

Hyperliquid absorbed this migration with a 23.4% share and a 70% grip on Open Interest, while Aster and EdgeX attracted additional flow through latency advantages, rebates, and new 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.

This shift became evident when Tron’s founder, Justin Sun, transferred nearly 10 million LIT to exchange hot wallets. Arkham data indicated that 7.212 million LIT was sent through one route, followed by another 5 million through a second deposit path.

Source: X

During the same period, other wallets added 1–2 million LIT to the same infrastructure, indicating preparedness for rapid execution in case of increased volatility. The movement of funds into hot wallets reduced transparency but increased sell-side options, impacting sentiment.

Meanwhile, Wintermute accumulated LIT inventory, hinting at expectations of higher activity. In contrast, HTX routed 6.5 million LITs to the zkLighter infrastructure, signaling ecosystem support rather than immediate selling.

Source: X

Justin Sun’s strategic positioning reflects flexibility, supporting Lighter’s recovery while maintaining readiness for market downturns.

Final Summary

• The exhaustion of incentives and post-airdrop exits weakened Lighter’s speculative flow, allowing Hyperliquid to absorb liquidity and take the lead in structural derivatives.

• Whale routing and market-maker inventory buildup indicate hedged positioning, balancing ecosystem support with readiness for execution during Lighter’s fragile recovery phase.