Ethereum network upgrade and uptick in Arbitrum active users could trigger an ARB price reversal

While the Arbitrum governance token (ARB) has been in a steady slump since the airdrop in late March, its ecosystem is showing healthy growth.

A recent Nansen report showed that Arbitrum activity improved after the airdrop, stabilizing “at a higher level” than it was before the airdrop. Daily active users, gas fees, and number of transactions have maintained consistently higher levels since April 2023.

The gap between the number of active users on Arbitrum and Optimism widened after the Aribtrum airdrop, closing on Ethereum.

Trading volume on Arbitrum-based decentralized exchanges paints a similar picture, showing a clear uptick in volume after the airdrop.

Furthermore, the Nansen report shows that ARB airdrop recipients account for only about 5% of the activity on the blockchain and Arbitrum has attracted more new users after the airdrop.

Possible upside catalysts for ARB

Moreover, dubbed Cancun-Deneb (Dencun), an upcoming update on Ethereum in the second half of 2023 will include EIP-4844 (proto-Danksharding), which will reduce transaction fees on Arbitrum, increasing the value proposition of the blockchain.

In addition, the Arbitrum Foundation recently exposed a backlog of data from its serializer, which is part of the Layer 2 fee users pay to publish data on Ethereum.

The foundation has decided to transfer the sequencer profits, which total 3,352 Ether (ETH), or $5.4 million, to Arbitrum DAO, and the ETH will be managed by ARB holders.

Altogether:

Arbitrum DAO has collected about 3,352 ETH in revenue,
About 5,954 ETH will be refunded to the sequencer, which is the cost of publishing all the data on the Ethereum network.

How exciting is that?

– arbitrum (,) (arbitrum) May 10, 2023

The source of revenue for a DAO – a decentralized autonomous organization – can create returns for ARB holders if the community votes to direct rewards to holders. It remains to be seen how the funds will be managed by the institution and the DAO.

“Smart Money” holds ARB

Nansen’s data shows that the “smart money” and the money that ARB has accumulated after the airdrop have not yet been sold, which is encouraging. The on-chain analytics firm labels high-volume and profitable traders’ Ethereum addresses as “smart money.”

ARB’s perpetual swaps funding rate turned negative like the rest of the cryptocurrency market after the Securities and Exchange Commission (SEC) filed lawsuits against the industry’s largest exchanges, Binance and Coinbase, according to CoinGlass data.

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Funding rates are paid by permanent swap dealers in order to buy or sell assets on demand. If the demand for sell orders is higher, it is considered more expensive, so traders on the short side push long positions.

Currently, funding rates are close to zero, which indicates that futures traders are ARB neutral.

The ARB/USD pair has observed a downward trend since the token was launched in March. Channel pressure shows the possibility of a falling wedge pattern, which tends to break out to the upside.

However, if the ARB breaks below the support line of the wedge pattern around $0.90, the move to the downside could swell quickly.

On the ETH scale, ARB broke the May low of 0.00057 ETH after lawsuits filed by the SEC. At the time of publication, the token was trading at 0.00056 ETH.

Technically, the ARB shows the possibility of a negative trend reversal. However, the upcoming Dencun update on Ethereum and the decisions made by the Arbitrum Foundation in guiding revenue from the L2 pool will ultimately dictate the price movement of the ARB.