Arbitrum is undoubtedly one of the Layer 2 "top students" with relatively strong data performance, and the currency price that continues to fall is its "flaw", even though the circulating market value has doubled from the beginning of the launch.
Nearly 2.6 billion US dollars were newly unlocked in 4 months, and 97% of holders were at a loss
Compared with the initial circulating market value of US$1.02 billion when it was launched, the current circulating market value of Arbitrum token $ARB has exceeded US$2.3 billion, but holders cannot escape the trap of continuous "blood loss". IntoTheBlock data shows that Arbitrum’s price performance is weak, with a whopping 97% of $ARB holders currently in the red, only 3% of holders at the current price, and almost no holders making profits.
Source: PANews
According to CoinGecko data, $ARB hit a record high of $2.26 in January this year, an increase of 67.4% from its launch in March 2023. However, $ARB then began to fall all the way, and recently hit a historical low, and is currently down from the peak. 69%. However, its circulating market value has only dropped 30% from its peak. In contrast, the price of ARB’s competing product OP has increased by 235% from the highest price at the beginning of its launch. The current price has dropped by more than 65.6% from the peak, and the circulating market value has dropped by 61.2% from its high point.
Source: PANewsArbitrum Circulation Market Value
The decadent trend of $ARB that has lasted for several months is directly related to the unlocking of large amounts of its tokens. Starting in March this year, the Arbitrum team and investors began to unlock a large number of $ARB tokens. According to PANews statistics, from March to now, the Arbitrum team and investors have unlocked more than 1.38 billion $ARB, with a total value of more than $2.59 billion.
Source: PANews
Arbitrum will also face more $ARB unlocks on the 16th of every month. For example, the Arbitrum DAO Treasury will be unlocked starting in July, with a value of up to $2.41 billion. It is expected to increase by about 400% until March 2027. According to Token Unlocks data, as of July 10, the unlocking progress of $ARB is temporarily 31%.
If market liquidity continues to decline, Arbitrum’s continued massive unlocking will undoubtedly drive its token price down further. For example, the encryption analysis platform DYOR recently stated that given the current liquidity, if investment institutions sell 5% of the unlocked amount every month, the price of assets such as $ARB will likely fall by 30% to 70%.
Many data still have leading advantages, and ecological subsidies may not be able to save currency prices.
Although the currency price performance is unsatisfactory, from the data point of view, Arbitrum is still in the lead among many Layer 2.
The latest data from Dune Analytics shows that as of July 10, the total number of accounts created on Arbitrum exceeded 31.751 million, and the total number of transactions has exceeded 800 million. The total cross-chain locked TVB on the Arbitrum chain has exceeded 3 million Ethereum coins, and the total number of cross-chain addresses is approximately 737,000. And L2BEAT data shows that Arbitrum One ranks first with a TVL of US$16.12 billion, accounting for 40.1% of the market; Growthepie data shows that the market value of Arbitrum stablecoin exceeds US$4.07 billion and ranks first, with a full-year increase of 116%, surpassing Base and OP Layer 2 such as Mainnet and ZkSync Era; the growth rate of active addresses in the past 6 months has reached 205%, exceeding ZkSync, OP Mainnet, etc.
Source: PANews
Arbitrum’s ecological data is undoubtedly subsidized by the large-scale currency distribution model.
Arbitrum has always played the subsidy card to assist its own ecological development. For example, in games, in June this year Arbitrum approved a 225 million $ARB proposal to fund game development on Arbitrum, aiming to build Arbitrum into the leading blockchain in the game industry. These funds will be distributed within three years; On RWA, Arbitrum plans to allocate 35 million ARBs for the RWA development plan, aiming to achieve 1% financial diversification of Arbitrum every year through the growth of the RWA ecosystem, and has now received over 99% voting support.
At the same time, Arbitrum is still "spreading money" to sponsor projects, providing approximately US$10.6 million in grants to more than 50 projects in 2023 alone. This year, Arbitrum also launched a short-term incentive plan aimed at drawing money from the DAO. The vault allocates up to 50 million $ARB to active protocols on Arbitrum, with 106 projects applying for first-round funding. This year, Arbitrum has also continued to provide financial support for various projects. For example, Open Campus recently announced that it has received funding from the Arbitrum Foundation to launch the first Layer 3 blockchain EDU Chain designed specifically for education; Pendle announced that it has received Arbitrum STIP 1 million $ARB funding; Synthetix launched the Arbitrum Liquidity Incentive Program, providing 2 million $ARB rewards to attract liquidity providers, stablecoin liquidity and Perps trading activities; Curve Finance claims to have received more than 237,000 from Arbitrum Donate $ARB to provide incentives to the Curve pool on the Arbitrum chain.
However, Arbitrum’s approach of building an ecosystem through token subsidies has also caused dissatisfaction. According to the community, this approach not only failed to empower the tokens, but also increased selling pressure. For example, Continue Capital Lianchuang Pima issued a blunt statement that the leaders of many companies lack the skills to allocate resource capital. If the capital retention is only for predatory subsidies, it has no long-term value. The ultimate goal of subsidies is to serve long-term monetized cash flow. KOL BITWU.ETH said that $ARB is a typical "low circulation, high emission" ecological subsidy strategy, which ultimately leads to "continuous growth in market value and fluctuations in token trends." To put it bluntly, this method constantly sacrifices the secondary market and is more suitable for trend traders. It is not the kind of coins that can get huge odds by just grabbing them. The value of these coins has long been mined by institutions and has been fully valued. There will only be Beta benefits in the future, not Alpha benefits.
Source: PANews
In addition, Arbitrum DAO is also considering learning from the practices of technology giants to implement mergers and acquisitions to achieve ecological expansion. Arbitrum DAO approved an eight-week M&A pilot program proposed by Areta's founding partner Bernard Schmid in May this year. Marketing companies, business development, infrastructure providers, stablecoin issuers and zero-knowledge technology are the most popular Attractive potential acquisition target. If the pilot is successful, Schmid plans a more ambitious proposal: setting up an M&A unit with a pool of $100 million to $250 million and identifying and acquiring potential targets within two years. DeepDAO data shows that the value of Arbitrum’s treasury holdings is US$2.6 billion, of which 97.4% is the token $ARB, which is a drop of more than 65.7% from the peak.
It is worth mentioning that Arbitrum is also trying to make iterative updates in terms of products and governance to optimize developer and user experience. For example, in April this year, the Arbitrum Foundation planned to change the Arbitrum expansion function plan to allow on any blockchain. Deploying a new Orbit chain; at the end of last month, the Arbitrum Foundation proposed the use of a new transaction ordering strategy, Timeboost, to enhance the efficiency and fairness of network transactions; Arbitrum announced that it would launch functions that combine zero-knowledge proofs and Stylus MultiVM.
Among the governance proposals, what has a direct stimulus effect on the token is the new $ARB staking reward proposal proposed by Arbitrum, which plans to use 50% of the sequencer fee to reward staking, thereby enhancing the economic security of the DAO and reducing the risk of attacks on the treasury. . DeFi researcher Ignas said in this regard that in this plan, 50% of the remaining future orderer fees will be used to reward $ARB token stakers. Assuming the annual fee is 12,000 Ethereum and the ARB price is $1, this will translate to 7 % APY, this mechanism of sharing revenue with token holders is a smart proposal for $ARB, which is in a declining state.
From the current point of view, in the face of huge unlocking pressure, Arbitrum’s ecological subsidy strategy has not yet significantly boosted the price of $ARB. As the market’s controversy over the low circulation and high FDV gameplay intensifies, Arbitrum will face greater challenges. .
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "PANews"
Original author: Nancy, PANews
