Hours after Ethereum co-founder Vitalik Buterin rated Arbitrum’s (ARB) transition to phase 1 positively, the token’s price surged by 22%. Buterin’s comments on Warpcast highlighted Arbitrum as the first genuinely decentralized Layer 2 (L2) project, signaling a significant milestone in its evolution towards full decentralization. The transition to phase 1 indicates that Arbitrum has met five key conditions for decentralization, one of which includes allowing users to exit without permissioned operators.
Buterin pointed out that a fraud-proof system in this context can ensure scalability on the chain while protecting against incorrect state transitions. He expressed satisfaction with the current progress and the prospect of more L2 solutions reaching phase 1 by 2024. His remarks emphasized the importance of real decentralization and his hope for a future with numerous phase 1 rollups and further decentralization of sequencers.
The price increase also offers relief to ARB holders who have endured a significant drop from the launch price, despite ARB still trading at 86% below its initial value. However, a 76.45% increase over 90 days suggests a potential trend towards a new peak. Another driving factor behind ARB’s momentum is its correlation with Ethereum (ETH).
As an Ethereum L2 solution, Arbitrum’s foundations suggest a strong likelihood of ARB having a robust correlation with ETH. Data from Coinglass shows a 29% increase in open interest over the last 24 hours, indicating a potential rise in bullish sentiment. Open interest refers to the number of outstanding derivative contracts tied to a cryptocurrency that have not been settled. An increase in open interest can signal a rise in long/short positions, while a decrease may indicate a reduction in allocated liquidity, potentially affecting price trends.
Consequently, predicting a rise to $2 for ARB is not unfounded. However, market participants should be aware of ETH’s price movements, as a slowdown in ETH’s momentum could similarly affect ARB. Conversely, if ETH moves towards $2,500, ARB could surpass the $2 threshold.