Arbitrum (ARB), an Ethereum layer 2 scaling solution, recently experienced a price decline, falling below the $2 mark after a brief attempt to set a new price floor. This decline, caused by a number of factors, including increasing selling pressure and weak technical indicators, raises questions about the token’s near-term trajectory while also highlighting its long-term potential.
ARB price losing its grip on the $2 handle. Source: Coingecko
Heavy selling triggers a downward spiral.
The price decline began with a surge in selling pressure, particularly from Convex Finance. In the last 24 hours, the DeFi giant offloaded 901,392 ARB tokens worth $1.63 million at an average price of $1.8 per token.
The move, which netted the company over $400,000 in profits since acquiring its tokens through an airdrop last year, sparked a domino effect and other investors followed suit.
$ARB The price has fallen ~9% in the last 24 hours!@ConvexFinance Prices worsened further with 901,392 units sold. $ARB ($1.63 million): 559.4 $ETH In the last 45 minutes it was ~$1.812.
they received it $ARB In the April 2023 DAO airdrop, it was only valued at $1.2 million at the time.
Token Flow:… pic.twitter.com/09al0a71Oj
— Spot on Chain (@spotonchain) February 22, 2024
Bearish indicator strengthening the downtrend
Technical indicators on the daily time frame charts further deepen the downtrend. The short-term moving average (SMA), which previously served as support near $2, has turned into resistance. The Relative Strength Index (RSI) fell below the neutral line, suggesting a weak but dominant downtrend.
Despite decline, there are signs of resilience. The token experienced a slight recovery of 0.2% and is currently trading at around $1.88. Additionally, funding rates on derivatives platforms such as Coinglass remain positive at 0.014%, indicating that buyers are less aggressive than before but still retain some control.
ARBUSD trading at $1.77 on the 24-hour chart: TradingView.com
Low derivative interest: a word of caution.
However, the derivatives market paints a less optimistic picture. Open interest, a measure that reflects the total capital locked in futures contracts, is approximately $254 million, indicating relatively low interest in ARB compared to other tokens. This lack of participation could potentially limit upward momentum and price stability.
Long-term prospects remain promising
Despite the recent price decline, Arbitrum boasts strong fundamentals and long-term potential. Fast, affordable transactions continue to gain traction with increased developer adoption and ecosystem development. Recent partnerships, such as Arbitrum’s launch of ApeCoin’s ApeChain, further solidify its position as a leading layer 2 solution.
Although current price movements suggest a period of consolidation, Arbitrum’s long-term prospects remain promising. Investors should carefully consider market trends, technical analysis and fundamental factors before making investment decisions.
Featured image by Kamil Pietrzak/Unsplash, chart by TradingView
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