Markets

Arbitrum (ARB) Bullish Despite $120 Million Drop?

The price of Aribitrum (ARB) is down 28% over the past week. But the team raised other downside concerns when it announced another airdrop via Twitter on April 25. How will the price of the ARB respond, as existing Arbitrum holders bear 5% of the unrealized losses?

Arbitrum is a layer two scaling solution for the Ethereum blockchain, designed to improve transaction speeds and enhance privacy by storing data off-chain. On Tuesday, April 25, Arbitrum (ARB) stoked fears of a price bounce yet again when it airdropped 113 million tokens worth nearly $120 million to reward 131 decentralized autonomous organizations (DAOs) that built early projects on the Arbitrum network.

Within the first 12 hours after the airdrop, the market seemed unaffected as ARB price sat precariously above the $1.30 support level.

Whale DAOs have not sold airdropped ARBs

As many would have expected, few DAOs, including tridentThey immediately sold their tokens within an hour of the airdrop. However, at the time of publication, on-chain data from Loookonchain shows that none of the top 50 Airdrop recipients have sold out.

The chart above shows that most of the major recipients are high-profile crypto DAOs with large treasuries.

Arbitrum (ARB) Top Airdrop Receiver. April 2023 Source: LookOnChain

In general, institutional whale DAOs are typically known as long-term owners with unique preferences for generating passive income on their holdings rather than exploring short-term profit-making opportunities.

Moreover, unlike retail holders who can sell of their own volition, most DAOs go through a time-consuming voting process before making asset management decisions.

With these places, if the top DAOs continue to HODL, the ARB can avoid a price correction in the coming days.

Arbitrum is gathering some momentum

Another important bullish sign for Arbitrum is the recent spike in daily active address (DAA) interaction on the network. According to data from Emotionthe daily active addresses engaged on Arbitrum increased for 3 consecutive days.

Since its last drop of 17,687 addresses on April 21st, Arbitrum has posted a staggering 250% increase to 61,886 addresses at the end of the day on April 24th.

Arbitrum (ARB) price vs daily active addresses.  April 2023.
Arbitrum (ARB) price vs daily active addresses. April 2023 Source: Emotion

An increase in DAA (Daily Active Addresses) is a bullish sign because it indicates an increasing number of users on the network. This indicates that more individuals and entities are adopting Arbitrum and projects built on it.

In addition to HODLing DAOs, the recent rally in DAA could soon lead to higher demand and possibly prolonged price hikes for ARB.

ARB Price Prediction: A slight bullish momentum could lead to a recovery towards $1.45

If we look closely at the current market capitalization to realized value (MVRV) ratio of the L2 network, it is likely that the price of ARB will rebound towards $1.50 before the bears get into play.

As it stands, most of the investors who bought into ARB over the past month are already 5% underwater. And when MVRV drops to these significant levels, stockholders will likely stop selling to avoid further losses.

If the bullish scenario continues, ARB price could rise by 10% to $1.45 before encountering significant resistance. And if the bulls can clear this resistance level, Arbitrum could rally towards $1.60.

Arbitrum (ARB) price vs. MVRV ratio.  April 2023.
Arbitrum (ARB) price vs. MVRV ratio. April 2023 Source: Emotion

However, the bears could still turn the tide if the ARB price drops below $1.30. However, investors desperate to keep their losses below the 5% range will offer support at this level.

But, if the $1.30 support level fails, Arbitrum price could drop further towards the 10% loss range at $1.23, where holders may stop selling and inadvertently trigger a rally.

Disclaimer

In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to providing accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.

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