Arbitrum sees drop in price post airdrop, but DeFi fundamentals remain strong!
Arbitrum's user activity is seeing sustained growth, with TVL in DeFi close to breaking ATH and institutional players are buying into the token too!
30 MAR 2023, 3 min read
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Right after the airdrop of the highly anticipated ARB tokens, from the major Ethereum layer-2 scaling project, Arbitrum on March 23, we saw a massive dump of the ARB tokens and projects in the Arbitrum ecosystem. This was somewhat in line with a 'sell-the-news' kind of event that went through the market.

The announcement for the Arbitrum airdrop was made on March 16 and since then we saw a major rally in many of the projects running on the Arbitrum ecosystem. We saw a huge uptrend in projects like GMX (GMX), Magic (MAGIC), Gains Network (GNS), and Radiant Network (RDNT).

But soon after the actual airdrop on March 23, prices of the tokens from these projects also fell as the market witnessed major dumping action across the table of the newly launched ARB token.

However, recent data shows that the underlying activity on the layer-2 project has remained pretty strong despite the heavy selling pressures in the ARB token, which has fallen over 88% since its opening price in the market. So, with the ARB token stabilizing around $1.3 as of writing, can we expect it to be well-positioned for further growth from current levels?

Let's take a look.

Arbitrum DAOs for the win!

One of the biggest factors that can be expected to contribute to a positive movement on the price of ARB, and effectively in the overall layer-2 project too is the fact that the airdrop included 1.1% allocation out of the total ARB supply of 12.75 billion ARB for the DAOs in the ecosystem. This way, decentralized autonomous organizations built on the Arbitrum network will get a chance to promote the usage through extensive ARB incentivization.

According to a report by "The Ape's Prologue" and cited by crypto news portal, CoinTelegraph - the size of the airdrop for Arbitrum ecosystem projects is significantly lower than the usual industry norms. The Ape’s Prologue report added,

“Optimism’s incentives were significantly larger than Arbitrum’s. While $ OP’s governance fund accounts for 5.4% of the total supply, $ARB is just 1.1%.”

Arbitrum User Activity & Liquidity Remains Consistent

Despite the nearly 88% drop in the value of ARB token immediately after its airdrop amid market-wide dumping of the token, the activity across the continues to surge. In fact, the transaction count on Arbitrum with 2.77 million transactions was 2.7 times higher than Ethereum, with only 1.08 million on the day of the airdrop.

Transaction Count on Arbitrum. Source: Dune Analytics

Arbitrum has also had a history of taking the charge when it comes to the overall performance of layer-2 solutions on the Ethereum network. According to CoinTelegraph, since the start of 2023, Arbitrum's share of transactions among Ethereum, Arbitrum, and Optimism has increased from 12.7% to a staggering 30.7%! This indicates the rising trend of users increasingly shifting to layer-2 solutions favoring higher throughput and lower costs than the bulkier and more expensive Ethereum mainnet, and Arbitrum is leading the charge.

Arbitrum DeFi TVL close to a new all-time high!

Arbitrum's total-value-locked (TVL) in DeFi has also exploded since the announcement of the launch and is now very close to breaking out of its previous ATH that was touched back during the bull run of October-November 2021.

Arbitrum's TVL in DeFi currently stands at $2.24 billion as of writing this article and Arbitrum's newly launched token after the crash currently has a market capitalization of $1.76 billion according to data from CoinMarketCap.  

Arbitrum TVL in DeFi | Source: DefiLlama

Smart Money buying up ARB tokens!

Also, to further add to the above arguments - according to reports from analytics firms LookOnChain and Arkham Intelligence - there have been several whale accumulations of ARB tokens!

Also, several institutional and hedge fund Ethereum wallet addresses are anticipated to be holding large quantities of ARB tokens post the airdrop too. A collection of these wallet addresses identified by Nansen claimed a total of 15.2 million ARB tokens, representing 1.19% of the total unlocked supply!

Thus, overall, despite the plunge in prices - things seem to be going pretty well for the Arbitrum project as a whole and a solid recovery may be due in the token.

Values as on March 30, 2023.  

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