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Home»BITCOIN NEWS»Arbitrum (ARB) hit rock bottom, but its market cap soared to $2 billion. What causes this disconnect?
BITCOIN NEWS

Arbitrum (ARB) hit rock bottom, but its market cap soared to $2 billion. What causes this disconnect?

By Crypto FlexsJune 20, 20243 Mins Read
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Arbitrum (ARB) hit rock bottom, but its market cap soared to  billion.  What causes this disconnect?
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Arbitrum’s governance token price, ARB, is experiencing a severe slump as it approaches an all-time low. However, despite this downward trend, ARB saw significant growth, with its market capitalization increasing by more than 75%, reaching $2.23 billion.

Market capitalization ignores price declines

An additional 36% of Arbitrum’s total token supply will be unlocked over the next three years. today, circulating supply This amounts to approximately 2.9 billion tokens.

CoinGecko data ARB’s price has fallen 24% over the past year and is currently trading at $0.816, slightly above its all-time low of $0.74. Despite this price decline, ARB has experienced significant growth, with its market capitalization surging from approximately $1.27 billion a year ago to its current value.

The market capitalization of a cryptocurrency is determined by multiplying the price of a single token by the total number of tokens in circulation. Typically, market capitalization increases when the price of a token rises and its circulating supply remains constant.

But for Arbitrum Governance TokenDespite the price drop, the distribution supply increased significantly, leading to an increase in market capitalization.

The act of unlocking tokens takes a huge toll on the price of Arbitrum

Depending on the Unchained’s increase in market capitalization can be attributed to the unlocking of previously frozen tokens. Unlocking these tokens prevents massive selling by early investors during the early stages of the project.

In March, Arbitrum began unlocking significant tokens as follows: reported According to our sister website NewsBTC, 1.13 billion ARB tokens were unfrozen, marking the largest unlock of the past year.

According to Arbitrum’s governance document, there will be monthly token unlocks until 2027, with each unlock amounting to approximately 108 million ARB tokens.

This will result in the release of an additional 3.6 billion tokens on top of the 6.4 billion tokens currently unlocked. At the current price, each Monthly UnlocksExcluding March 2024, the value is approximately $83 million.

The remaining token unlocks will be allocated to Arbitrum Foundation, Offchain Labs, and investors. Since the March airdrop and the first major token unlock, the ARB token has fallen about 64% from its local high of $2.15.

In summary, the inverse relationship between ARB’s price and market capitalization shows the impact of significant token unlocks on market dynamics.

While the ARB token has struggled to maintain its value, the increase in circulating supply has fueled the growth of its market capitalization. The ongoing unlocking process will be an important aspect to monitor as it continues to shape the price and market performance of the token over the next few years.

The daily chart shows the six-month downward trend in ARB price. Source: ARBUSD on TradingView.com

The ARB token has rebounded after hitting a low of $0.745 on Tuesday and is currently trading at $0.8160, up 5% over the last 24 hours. today, market capitalization The size of ARB is $2.36 billion.

Featured image of DALL-E, chart from TradingView.com

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