Arbitrum’s native token, ARB, has experienced a significant drop in recent weeks. On July 5, ARB reached its lowest price to date at $0.57. Despite a subsequent 22% increase, the decrease in user demand for the Layer-2 network threatens to nullify these gains.
What Is Causing the Decline?
On-chain data reveals a sharp decline in user demand for Arbitrum since June 21, with the daily number of active addresses falling by over 46%. This reduction in unique active addresses has resulted in a similar decline in daily transactions, which have dropped by 34% after reaching a peak of 3.5 million earlier this year.
Additionally, Arbitrum’s network fees and the associated revenue have plummeted to their lowest levels in months. The total network fees had surged to a record $3.4 million on June 20, driven by the LayerZero airdrop event. However, following the event’s conclusion, network fees fell by 98% as users left the platform.
Could Whale Activity Impact ARB’s Future?
Santiment’s Chief Analyst Brian Quinliven has emphasized that the lack of whale activity, which parallels trends seen in optimism, indicates a potential for future volatility. According to Quinliven, the gradual decrease in large transactions might suggest that whales are waiting for more market movement to make substantial investments.
Key Insights for Investors
- The daily number of active addresses on Arbitrum has dropped by over 46% since June 21.
- Daily transactions on the Layer-2 network have decreased by 34% from their peak.
- Arbitrum’s network fees plummeted by 98% following the LayerZero airdrop event.
- Whale activity is currently low but may increase with higher market volatility.
Potential Recovery or Further Decline?
ARB’s price showed a decline last week, but the Chaikin Money Flow (CMF) indicates an upward trend. This suggests that selling pressure may be waning, potentially leading to a price recovery. If this trend continues, ARB could rise to $0.72. However, if the downtrend persists, the token’s price might drop to $0.66.