The Arbitrum network, a Layer 2 solution for the Ethereum network, has undergone significant developments following a new unlock of ARB tokens on Saturday (16). Since then, the price of Arbitrum (ARB) has seen a correction of up to 25% and is currently trading at $1.51.
However, a curious phenomenon occurred during this period. While ARB’s unit price fell, the token’s market value reached an all-time high. At the time of writing this article, ARB has a market value of US$3.9 billion, but it once had more than US$4 billion. What explains this apparent contradiction?
Cliff Unlock
The ARB token unlock event called “Cliff Unlock” on March 16 resulted in an additional 1.1 billion tokens for investors, team members, and advisors. Thus, the ARB supply rose again, triggering concerns about the token’s price.
Such an event typically triggers market sell-off concerns, causing a notable drop in value. And that happened, with the price of ARB falling by 25% after the announcement. In the last 24 hours, the price of the token registered a drop of 11.7% after reducing part of the losses.
Arbitrum opted to release all tokens simultaneously instead of doing it gradually. Of the total, 673.5 million tokens were allocated to advisors and staff. Investors received the remaining 438.25 million.
On the other hand, Arbitrum’s market value increased by 80% and surpassed US$4.0 billion in the last 24 hours, even with the price drop. This is due to several factors, including increased adoption and utility within the ecosystem.
A crucial aspect that plays a key role in Arbitrum is its tokenomics, particularly the inflation rate. For example, despite Solana’s per token price being lower than its previous all-time high (ATH), the network’s market cap has reached a new peak.
Furthermore, the inclusion of new tokens contributed to increasing the network’s market value even with the drop in ARB’s price. With more tokens in circulation, the total value tends to increase even as the price drops.
ARB token whale activity
On March 18, the Lookonchain platform revealed the transfer of approximately 58 million ARB to exchanges. This is just a small fraction of the tokens unlocked on the 16th. The data shows that 11 large investors, or “whales”, were behind these transactions.
This data suggests that a significant portion of whales chose to hold their ARB tokens, indicating greater confidence in the project’s long-term prospects.
Based on data from Santiment, transactions over $1 million increased on March 16, coinciding with the unlock. While this could indicate potential selling activity, there was a notable increase in wallets containing between 100,000 and 100 million ARB tokens on the same day, suggesting further accumulation.
