The popular Layer-2 network Arbitrum’s native token, ARB, has significantly dropped in the last few weeks. On July 5, the altcoin traded at an all-time low of $0.57. Although ARB’s price has increased by 22% since then, the decline in user demand for the Layer-2 network threatens to erase these gains.
What Is Happening on the Arbitrum Front?
On-chain data shows a decline in user demand for Arbitrum since June 21. The daily number of active addresses involved in at least one transaction in the ecosystem has dropped by over 46% since that day. Due to the decrease in the number of unique active addresses on the network, the number of transactions completed daily on Arbitrum has also decreased. The daily transaction count on Layer-2 started a downward trend after climbing to a peak of 3.5 million year-to-date. Since then, there has been a 34% decline.
Due to fewer transactions being completed on Layer-2, Arbitrum’s network fees and the revenues generated from them are at their lowest levels in months. Arbitrum’s total network fees surged to an all-time high of $3.4 million on June 20 because Layer-2 was used as the main coordination network for the LayerZero airdrop event. However, following the conclusion of the controversial airdrop event, users flocked away from Arbitrum, reducing network fees by 98% the next day.
Santiment Chief Analyst Brian Quinliven increased the bearish sentiment by insisting that whales could maintain bullish momentum before shifting funds:
“The absence of whale activity is quite similar to what we see with optimism. The gradual decrease in large movements is not necessarily a bad thing. It means they might be waiting for a bit more volatility to really capitalize before making their moves.”
ARB Chart Analysis
While ARB’s price showed a downward trend last week, the Chaikin Money Flow (CMF) indicated an upward trend. This indicator measures how money flows in and out of an asset. If the CMF data rises while an asset’s price falls, a bullish trend forms.
This discrepancy indicates a potential price change. It suggests that selling pressure may weaken and the asset’s price may be ready for a recovery. In such a case, ARB’s price could rise to $0.72, but if the current downtrend continues, the token price will drop to $0.66.
