stub Arbitrum (ARB) Kicks the Week off on a Strong Note With Gains Topping 13% - Securities.io
Connect with us

Market News

Arbitrum (ARB) Kicks the Week off on a Strong Note With Gains Topping 13%

mm
Updated on
Market Up

Amidst the green market, which has Bitcoin just under $30,000, Ether above $2,100, and the total crypto market cap around $1.32 trillion, Arbitrum (ARB) has kicked off the new week with attractive gains. And for a good reason!

After ending the weekend at around $1.60, the ARB token went on to surpass $1.80 in the early hours of Tuesday.

The $2.2 bln market cap coin is up more than 13% this week, over 41% in the past week, and 52% in the past fortnight. While trading at $1.78, as of writing, the token is still down nearly 80% from its all-time high (ATH) of $8.67, hit just late last month.

ARB token was distributed to early project supporters through a highly-anticipated airdrop on March 23. The hype ended up taking down the project's main website as eligible wallets started claiming their airdrop.

What led to This Price Surge?

Arbitrum (ARB) is a popular Layer 2 scaling solution that has been experiencing a sudden surge in its value since its launch. While the crypto asset topped in March, it has been seeing a renewed uptick in its value in April. The surge that started last week continues this week too.

This makes sense, given that technicals agreed in favor. The Relative Strength Index (RSI) on a lower time frame indicated a bull momentum, with ARB already crossing the 75 mark and surpassing 80.

Last week, the largest cryptocurrency exchange Binance announced a new trading pair, ARB/RUB, which may have contributed to the surge in ARB's values as one of the most sought-after L2 tokens became more convenient to buy and sell.

Additionally, Santiment's volume metric revealed a corresponding spike, with ARB's volume surpassing 2 billion. This week, the 24-hour volume is around $1.16 bln, as per CoinGecko.

Arbitrum has experienced significant growth in recent months, with the number of accounts surpassing 5 million on Monday, according to user Henrystats on Dune Analytics. This is partly due to all the development happening on layer 2 and the recent 1.275 billion ARB tokens distributed to eligible addresses.

Although there are now over 4 million active accounts in the ARB ecosystem, weekly user activity has dropped significantly from the March 20 high of 1.38 million to around 333,000 users. Furthermore, while 83.7% of all ARB accounts have at least one transaction, 24.2% of those accounts have only one transaction, which may indicate that some users sold their ARB after receiving the airdrop.

However, there is still a significant amount of activity in the ARB ecosystem, with nearly 200 million transactions having been completed since its inception. Additionally, on April 15, a proposal by Arbitrum DAO to recall 700 million governing tokens to its treasury was outvoted by a large margin, indicating strong support for the platform.

Total Value Locked (TVL) on Arbitrum has been on the rise, too, after experiencing a significant decline in March. As of this writing, the TVL stood at $2.31 million, according to DeFi Llama. Ever since mid-March, when the TVL had fallen to $1.25 bln, the value has been on the rise to climb back to the level last seen in November 2021.

The biggest contributor to this growth is derivatives platform GMX accounting for 25.24% of the TVL at $582.6 mln. Other popular platforms on Arbitrum include DEX Uniswap V3, lending protocols Radiant and Aave V3, cross-chain protocol Stargate, and DEXs Sushi and Camelot.

ARB is also among the 3 best tokens to buy in 2023.

Leading the Layer 2 Ecosystem

The Layer 2 scaling solutions landscape is highly competitive, but Arbitrum is the one in the lead along with zkSync, while Polygon and Optimism trail behind as other newcomers like Starknet try to establish themselves.

As more and more participants enter the Layer 2 space, it is leading to heightened competition, which may have both favorable and unfavorable impacts on the progress of L2 scaling solutions.

In Ethereum gas consumption, zkSync has emerged as the frontrunner with a market share of 32%, surpassing Arbitrum and Optimism, which captured 26% and 24% of the market share, respectively.

But when it comes to fees generated, Arbitrum is the one that dominates by accounting for 41% of all L2 fees, with Polygon and Optimism constituting 23% and 22% of the fees generated, respectively. This has helped Arbitrum gain considerable market traction over the last few weeks.

Artemis data suggests that the growing number of daily active addresses on the Arbitrum network is a key factor contributing to its high fee generation.

Currently, the network boasts 249,900 daily active addresses. However, Polygon has surpassed Arbitrum with 318,800 daily active addresses, while Optimism and StarkNet are behind in user activity.

Arbitrum's performance has actually been consistently impressive, outperforming its top Ethereum L2 rival, Optimism, on almost all key metrics in 2022 and 2023.

Last year, Arbitrum generated $6 million in profits versus $4 million by Optimism and $22 million in sequencer revenue compared to Optimism's $18 million. Then in Q1 of 023, Arbitrum outperformed Optimism's profits by $3 million and revenue by $4 million.

Moreover, Arbitrum recorded a higher TVL than Optimism, whose TVL at present is just $967 million. ARB is also relatively cheap compared to Optimism, which adds to its attractiveness.

The landscape of Layer-2 protocols is expected to undergo significant updates in the near future, which may alter the current state of affairs. Currently, however, Arbitrum reigns supreme with a 66% market share. Notably, it has been in operation the longest, having launched officially in August 2021.

Potential for More Uptrend in the Future?

While ARB token price may experience some correction in the intermediate time period, the crypto asset may enjoy more gains in the future for several reasons.

Arbitrum is gaining traction as one of the most promising Ethereum layer-2 (L2) scaling solutions by aiming to reduce network transaction congestion and transaction fees.

Besides being the leading L2 chain, the token is also one of the best-performing cryptos following Ethereum's highly anticipated Shanghai upgrade. This success has given rise to expectations that ARB prices may rise over the next few months.

One reason for this optimism is that, according to Messari, Arbitrum generated $2.5 million in profits in March 2023 through sequencing. This income will eventually go to ArbitrumDAO, the community-managed DAO responsible for managing the platform.

As the DAO grows more decentralized, it could monetize maximal extractable value (MEV) by auctioning off rights to produce blocks, opening up opportunities for ARB as a staking token.

This is not to say, Arbitrum is issue-free. The nascent Layer 2 ecosystem was actually surrounded by controversy ever since it launched its ARB governance token with too much fanfare. The project has been facing accusations of “decentralization theater” after a botched governance proposal.

The dispute emerged when the DAO was requested to approve its proposed constitution, the establishment of the Arbitrum Foundation, and endow it with over $1 billion worth of ARB. It was indicated that 750 million ARB had already been earmarked for the Foundation, and 50 million tokens were sent to Binance on the first day of ARB trading, presumably for selling purposes. The proposal was rejected, and the Foundation said it would revise and present each part of the comprehensive proposal separately for voting.

Overall, while there may be some consolidation and fluctuation in user activity, the growth of Arbitrum's user base and transaction volume suggests a strong demand for its services and a promising future for the platform.

Gaurav started trading cryptocurrencies in 2017 and has fallen in love with the crypto space ever since. His interest in everything crypto turned him into a writer specializing in cryptocurrencies and blockchain. Soon he found himself working with crypto companies and media outlets. He is also a big-time Batman fan.