As the price of the currency hits a new low, Arbitrum embarks on the road of self-rescue

As the six-month deadline for listing on the exchange approaches, the token performance of the leading L2 network Arbitrum is really surprising. In particular, in September, the price of the token fell below $0.9, setting a new low since the opening of March.

This not only caused a number of large and small investors, including whales, to suffer long-term continuous losses, but also caused Arbitrum's reputation to decline, and it fell into a vortex of doubts about falling behind in the battle for L2 expansion.

The upcoming Cancun upgrade in the second half of the year and the unlocking of 1.11 billion ARB in March next year have put Arbitrum under considerable pressure. If the downward trend still cannot be stopped, Arbitrum may really lose its leading position. Under internal and external difficulties, Arbitrum needs to fight a desperate battle.

Debut is the peak?

On March 20, Arbitrum (ARB) was launched on major trading platforms including Binance, with the lowest opening price of $0.5 on that day. In the following six months, it only rose once in the month of its launch, following the market trend, reaching a maximum of $1.82. The increase was far lower than investors expected, and it could not be compared with APT and OP, which were launched some time earlier.

In terms of market price, APT, which was launched in October last year, experienced a sharp rise in January this year, with the price rising from around $3 to $20.4, which gave APT investors a pleasant surprise. Similarly, OP's performance is also remarkable, with two significant increases since its launch, which undoubtedly makes investors more optimistic about OP's future prospects.

But looking at ARB, it seems that it has reached its peak since its debut. It has been nearly half a year since its opening. During this period, the overall crypto market has risen, but ARB has remained unmoved. When it fell to the bottom position in August, it fell below the so-called support level. In September, it fell to $0.8701, setting a new low since its opening price.

The six-month-long decline has made many ARB investors lose their patience, and some of them have left the market with heavy losses. However, the value of ARB chips held by investors who have expectations for the future trend of L2 and have continued to increase their holdings with the belief of bargain hunting has also continued to depreciate as the price continues to decline.

According to on-chain data, the whale with the address starting with 0x6950 has accumulated an estimated loss of $3.35 million due to holding ARB. The whale withdrew 9 million ARB from Binance in July this year, and another 2.11 million on September 1, with a total of 12.7 million ARB held. The average cost price is estimated to be 1.18, and the overall loss is about 26%.

One of the side effects of the drop in ARB prices is the decline in Arbitrum’s overall TVL, which indicates that the network’s liquidity, popularity, and usability are decreasing.

According to DeFiLlama data, it can be seen from the figure that since Arbitrum TVL reached its peak of US$2.623 billion on May 6 this year, it has been on a downward trend since then. As of now, its TVL is US$1.678 billion.

Its business transaction volume also reached its peak after ARB went online, and has since dropped significantly.

Arbitrum’s price has hit a record low since its opening, which has shaken the confidence of previous holders. The price trend of its biggest competitor, Optimism, is relatively more promising. Coupled with the upcoming Cancun upgrade in the second half of the year, investors who are optimistic about the L2 track have to reconsider the future growth space of the two.

But unlike Optimism, Arbitrum faces huge pressure to unlock tokens. Generally, large-scale unlocking events (i.e. increasing the circulating supply by more than 1%) have a clear negative correlation: as the unlocking scale increases, the price will fall.

According to Token Unlocks, Arbitrum will unlock 1.11 billion ARB tokens worth $1.24 billion at a market price of $1.12 on March 16 next year. The unlocked amount is equivalent to 87% of the 1.275 billion circulating supply of the token. At least 12.75% of the ARB token supply has been used in circulation.

In addition, more than 5 billion ARB tokens are still locked, and after the unlock on March 16, more ARB will be unlocked on the 16th of each month for the next four years.

In the face of huge unlocking selling pressure, everyone has to weigh the negative expectations of ARB in the future.

Survival

In order to get rid of this embarrassing situation as soon as possible, Arbitrum has significantly accelerated its pace in recent times and has used various means to actively promote the development of the project.

Since August, Arbitrum's development team Offchain Labs has repurchased ARB several times. Its address starting with 0xb41 repurchased 3.087 million ARB (3 million US dollars) from Binance at a price of around $0.97, and in early September, it withdrew 1.217 million ARB from Binance at a unit price of $0.9 (1.1 million US dollars).

A similar operation took place during the crypto market crash in June last year, when Offchain Labs also used the address 0xb41 to accumulate 4.48 million ARB (US$4.45 million) at a price of US$0.99, but it did not cause a significant fluctuation in the ARB price.

In addition to the token repurchase, the Arbitrum Incentive Working Group also submitted a project short-term incentive plan AIP proposal in the community forum, which aims to allocate up to 75 million ARB rewards from the DAO treasury to active Arbitrum protocols to meet the short-term needs of the community.

In previous developer incentive plans, Arbitrum provided rewards to ecosystem developers in the form of NFTs. But as we all know, the entire NFT market has continued to fall this year, and NFTs have become unpopular.

However, the thing that can make investors feel that ARB still has hope of rising is that Arbitrum's L3 chain XAI, which focuses on gaming scenarios, has been officially launched, and XAI's Odyssey event has been launched. Developers can get a lot of rewards in the process of completing tasks.

The gaming track has always been valued by blockchain builders, and with the help of XAI, potentially billions of traditional game players will be able to obtain and trade in-game digital assets on the blockchain without using encrypted wallets.

This undoubtedly enhances Arbitrum's ecological strength and adds more weight than Optimism. I believe that with the use of XAI, more users will flock to it in the future.

Conclusion

Judging from the current results, it seems that the effectiveness of the above measures has not yet been shown. The ARB price is still sinking to the bottom, with no sign of a sharp rise.

Compared with the low-key Arbitrum project in the first half of the year, it can no longer remain calm in the second half of the year, otherwise other competitors in the L2 track such as Base, Line, Starknet, etc. are all trying to catch up. As for when ARB will return to the throne, we might as well wait patiently for a while.