Dive into Arbitrum huge unlock token scenario in 2024. Explore the Future of Crypto and the potential of Layer-2 top leading
What is ARB token?
The $ARB token serves as an ERC-20 governance token, granting its holders the ability to engage in on-chain governance activities within the Arbitrum DAO. Minted through a smart contract residing on Arbitrum One, a Layer 2 Arbitrum rollup chain, this token signifies a significant advancement.
Arbitrum One is the inaugural Arbitrum Rollup Chain to grace the Ethereum mainnet. It operates with absolute trustlessness, inheriting Ethereum’s fundamental security guarantees while refraining from introducing any extraneous trust assumptions. This makes it particularly suitable for decentralized finance and various use cases that demand the same level of trustlessness as Layer 1 solutions.
The Arbitrum DAO shoulders the responsibility of overseeing both the governance protocol outlined in its Constitution and the technologies under its purview. This jurisdiction extends to the Arbitrum One and Arbitrum Nova chains, along with their underlying protocols.
As a holder of $ARB tokens, you possess the privilege to participate in voting on governance proposals that have a profound impact on the functioning and development of both the Arbitrum One and Arbitrum Nova chains. These proposals encompass upgrades to the chains themselves, as well as strategies for the utilization of funds within the DAO Treasury.
TVL data before Arbitrum huge unlock token event
Between September 9 and September 11, the price of Arbitrum (ARB) token saw a significant and concerning drop of 15%, hitting an all-time low because of Whale Moves Millions of Arbitrum tokens to Binance, $ARB Undisturbed
This abrupt decline has left investors anxious and inquisitive, as they strive to understand the underlying reasons behind this price movement. The prevailing sentiment is one of uncertainty regarding Arbitrum’s competitive position in the market. Interestingly, this doubt persists even in the face of the network’s Total Value Locked (TVL) exceeding an impressive $1.6 billion.
Indeed, the context you’ve provided is significant. The fact that Arbitrum experienced a drop exceeding 9% within the context of a challenging week for cryptocurrencies, particularly among Ethereum’s scaling solutions, underscores the uniqueness of its price movement.
A 40% decline observed in the last two months has triggered numerous concerns, primarily signaling a decline in investor confidence. This downward trend carries the risk of diminishing liquidity and jeopardizing the project’s overall sustainability. Additionally, it could discourage potential newcomers, hindering the growth and adoption of the network.
Tokenomics – Potential Risk
The primary drawback they perceive in taking a long position in ARB today is that the token itself lacks practical utility, as it isn’t utilized for transaction fees or any substantial function beyond participating in governance voting.
Those familiar with fundamental analysis on Seeking Alpha may be aware of reservations regarding governance as the sole utility of a token. While it can be acceptable if the distribution of network or protocol tokens is genuinely decentralized, users witnessed instances, as seen with Uniswap (UNI-USD) last year, where “governance” is often invoked to rationalize a token that serves no tangible purpose, and significant decisions related to protocol governance may never actually be subjected to a vote.
It is asserting that this will necessarily be the scenario with Arbitrum, but it’s worth noting that token holders who recently received ARB through an airdrop represent a minority within the broader governance landscape:
Apart from the utility issue, it’s essential to consider the significant amount of token emission yet to come, with just 12.7% of the total initial supply currently in circulation. According to the Arbitrum Foundation, investor tokens won’t become available for trading for a year.
While user and DAO airdrops will be accessible in one week, all investor and team tokens are subject to a 4-year lockup, with the first unlock occurring in one year, followed by monthly unlocks for the remaining three years.
Given the lack of clarity regarding the vesting schedule, it’s prudent to exercise caution when contemplating a long-term investment in ARB at this time. ARB holders may enjoy a reduced risk of substantial sell pressure over the next 12 months, but it’s possible that we’ll witness a significant influx of ARB tokens in the market over the next 12-48 months.
“Smart money” is holding ARB
Nansen’s data reveals that the “smart money” and funds that acquired ARB after the airdrop have yet to sell, which is an encouraging sign. The on-chain analytics firm identifies Ethereum addresses belonging to high-volume and profitable traders as “smart money.”
Additionally, the funding rate for ARB perpetual swap contracts has turned negative, mirroring the broader crypto market’s behavior following the Securities and Exchange Commission’s (SEC) legal actions against the industry’s largest exchanges, Binance and Coinbase, as per CoinGlass data.
Arbitrum huge unlock token in 2024
Arbitrum (ARB) is preparing for a momentous token unlock scheduled for March 2024, set to release an astonishing 1.11 billion ARB tokens, equivalent to approximately $907 million at current market prices, into the cryptocurrency market.
Token unlocks entail the release of previously restricted or vested tokens into circulation. These occurrences frequently carry substantial implications for the price and sentiment surrounding a cryptocurrency. They can introduce inflationary pressures into the market and serve as bearish catalysts, prompting traders to closely monitor their timetables.
🌟 Is anyone curious about the pre/post-unlock analysis of @arbitrum ? 🌟
There was only one cliff unlock of $ARB
Here are the price impact results after the unlocks💡;– On the first day after unlocks, the price rose by 3%✨
– Then, it gradually dropped to -21% (around 21… pic.twitter.com/GQtxGCgoQF— Token Unlocks (@Token_Unlocks) September 18, 2023
Implication for Market
This unlock token is not only a challenge but also a chance for ARB growth.
The impending 2024 unlock presents both opportunities and challenges for the crypto market. Given historical data, the sheer scale of this release is likely to exert downward pressure on ARB’s price in the short term. As such, traders and investors should prepare for potential price volatility and its associated risks.
Meanwhile, Layer-2 solutions have emerged as the dominant force in the cryptocurrency sector, experiencing incredible growth from $5 billion to $10 billion in just nine months. Much of the credit for this remarkable expansion is attributed to Arbitrum, along with Base.
In a race for supremacy, Arbitrum has surpassed Optimism to become the world’s largest Layer-2 blockchain, boasting an impressive $5.3 billion in assets locked on its platform. Currently, Arbitrum commands over half of the funds locked in the Layer-2 market, while Optimism holds another 25.4% of the market share.
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