The price of the Arbitrum governance token (ARB) could experience a reversal due to positive developments in the Ethereum network and an increase in active users on the Arbitrum platform.
Despite a consistent downturn since the airdrop in late March, the Arbitrum ecosystem has shown signs of healthy growth.
According to a recent report by Nansen, activity on Arbitrum improved after the airdrop and has stabilized at a higher level compared to before the airdrop.
Daily active users, gas fees, and transaction counts have consistently remained higher since April 2023. The number of active users on Arbitrum has also been closing in on Ethereum, surpassing Optimism.
The trading volume on decentralized exchanges (DEXs) based on Arbitrum has seen a noticeable increase after the airdrop, further indicating the platform’s growth.
Additionally, the report reveals that the ARB airdrop recipients accounted for only about 5% of the blockchain’s activity, and Arbitrum has attracted a significant number of new users post-airdrop.
There are several potential catalysts that could drive ARB’s price upward. One such catalyst is the upcoming Ethereum update called Cancun-Deneb (Dencun) scheduled for the second half of 2023.
This update will include EIP-4844 (proto-Danksharding), which aims to reduce transaction fees on Arbitrum, thereby increasing the value proposition of the platform.
Furthermore, the Arbitrum Foundation has decided to pass on the earnings from its sequencer, a component of the layer-2 fees, to the Arbitrum DAO.
The DAO will manage the 3,352 Ether (ETH), equivalent to $5.4 million, earned from the sequencer. This revenue source could potentially generate yields for ARB holders if the community votes to direct the rewards to them.
Nansen’s data suggests that “smart money” and funds that accumulated ARB after the airdrop have not sold their holdings, which is an encouraging sign.
Funding rates for ARB perpetual swap contracts have turned negative, similar to the rest of the crypto market, following lawsuits against major exchanges like Binance and Coinbase by the Securities and Exchange Commission (SEC).
While the ARB/USD pair has been on a downward trend since its launch, there is a possibility of a positive breakout indicated by a descending wedge pattern.
However, if ARB breaks below the support line of the wedge pattern around $0.90, a significant downward move could occur.
Ultimately, the price action of ARB will depend on the upcoming Dencun update on Ethereum and the decisions made by the Arbitrum Foundation regarding revenue distribution.
It is important for readers to conduct their own research and exercise caution when making investment or trading decisions, as this article does not provide investment advice or recommendations.
Other Stories:
SEC blocks motion to dismiss Terraform Labs lawsuit
Do Kwon attends court hearing over forging documents
Cryptocurrency infrastructure provider shutters operations amid crypto winter
