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97% of ARB holders are losing money, what’s the problem?

97% of ARB holders are losing money, what’s the problem?

BlockBeats2024/07/11 03:55
By:BlockBeats
Original title: "97% of ARB holders are losing money, huge unlocking is the culprit, Arbitrum's ecological subsidy strategy is criticized as unwise"
Original author: Nancy, PANews


Arbitrum is undoubtedly one of the Layer2 "top students" with relatively strong data performance, but the continuous decline in the price of the currency is its "hard injury", even though the circulating market value has doubled compared to the beginning of the launch.


Nearly $2.6 billion in unlocking in 4 months, 97% of holders are in a state of loss


Compared with the initial circulating market value of $1.02 billion at the beginning of the launch, the circulating market value of Arbitrum token ARB has now exceeded $2.3 billion, but holders cannot get rid of the dilemma of continuous "bleeding". According to IntoTheBlock data, Arbitrum's price performance is weak. Currently, up to 97% of ARB holders are in a loss state, and only 3% of holders are flat at the current price, and almost no holders are profitable.



According to CoinGecko data, ARB hit a record high of $2.26 in January this year, up 67.4% from when it went online in March 2023, but then ARB began to fall all the way and hit a record low recently, currently down 69% from its peak. However, its circulating market value has only dropped 30% from its peak. In contrast, the price of ARB's competitor OP has increased by 235% from its peak at the beginning of its launch, and its current price has fallen by more than 65.6% from its peak, while its circulating market value has fallen by 61.2% from its high point.


Arbitrum Circulation Market Cap


ARB's months-long decline is directly related to its large-scale token unlocking. Starting in March this year, the Arbitrum team and investors began to unlock a large number of ARB tokens. According to PANews statistics, from March to now, Arbitrum's team and investors have unlocked more than 1.38 billion ARBs, with a total value of more than 2.59 billion US dollars.



And Arbitrum will also face more ARB unlocking on the 16th of each month, such as the unlocking of the new Arbitrum DAO Treasury starting in July, with a value of up to 2.41 billion US dollars, and an expected increase of about 400% until March 2027. According to Token Unlocks data, as of July 10, the unlocking progress of ARB is currently 31%.


If market liquidity continues to decline, Arbitrum's continued massive unlocking will undoubtedly drive its token price down further. For example, crypto analysis platform DYOR recently said that given the current liquidity, if investment institutions sell 5% of the unlocking quota every month, the price of assets such as ARB may fall by 30% to 70%.


Multiple data still have leading advantages, and ecological subsidies may not be able to save the price of coins


Although the price performance of the coin is not satisfactory, judging from the data, Arbitrum is still in the lead among many L2s.


The latest data from Dune Analytics shows that as of July 10, the total number of accounts created by Arbitrum exceeded 31.751 million, and the total number of transactions has exceeded 800 million. The total locked-in TVB of Arbitrum's on-chain bridge has exceeded 3 million ETH, and the total number of bridge addresses is about 737,000. And L2BEAT data shows that Arbitrum One ranks first with a TVL of 16.12 billion US dollars, accounting for 40.1% of the market; Growthepie data shows that the market value of Arbitrum stablecoin has exceeded 4.07 billion US dollars, ranking first, with an annual increase of 116%, exceeding Base, OP Mainnet and ZkSync Era and other L2; the number of active addresses in the past 6 months has increased by 205%, exceeding ZkSync, OP Mainnet, etc.



Arbitrum's ecological data is undoubtedly subsidized by the big money-spending model.


Arbitrum has been playing the subsidy card to assist its own ecological development. For example, in games, in June this year, Arbitrum approved a proposal of 225 million ARBs to fund game development on Arbitrum, aiming to make Arbitrum a leading blockchain in the gaming field. These funds will be distributed within three years. On RWA, Arbitrum intends to allocate 35 million ARBs for the RWA development plan, aiming to achieve 1% of Arbitrum's financial diversification each year through the growth of the RWA ecosystem, and has now received over 99% of the voting approval rate.


At the same time, Arbitrum is also "spending money" to sponsor projects, providing approximately $10.6 million in grants to more than 50 projects in 2023 alone, and this year Arbitrum also launched a short-term incentive plan to allocate up to 50 million ARB funds from the DAO treasury to active protocols on Arbitrum, with 106 projects applying for the first round of funding. This year, Arbitrum has also been providing financial support for various projects. For example, Open Campus recently announced that it had received funding from the Arbitrum Foundation to launch the first Layer 3 blockchain EDU Chain designed specifically for education; Pendle announced that it had received 1 million ARB funding from Arbitrum STIP; Synthetix launched the Arbitrum liquidity incentive plan, providing 2 million ARB rewards to attract liquidity providers, stablecoin liquidity and Perps trading activities; Curve Finance claimed to have received more than 237,000 ARB donations from Arbitrum to provide incentives to the Curve pool on the Arbitrum chain.


However, Arbitrum's approach of building an ecosystem through token subsidies has also caused dissatisfaction. In the community's view, this approach not only fails to empower tokens, but also increases selling pressure. For example, Continue Capital co-founded Pima and bluntly stated that many company leaders lack the skills to allocate resources and capital. If the retention of funds is only for predatory subsidies, there is no long-term value. The ultimate purpose of subsidies is to serve long-term monetized cash flow. KOL BITWU.ETH said that Arb is a typical "low circulation, high emission" ecological subsidy strategy, which ultimately leads to "growing market value and fluctuating token trends." To put it bluntly, this approach is to constantly sacrifice the secondary market, which is more suitable for trend traders. It is not the kind of coin that will get huge odds if you hold it. The value of these coins has long been mined by institutions and has been fully valued. In the future, there will only beta returns, no alpha returns.



In addition, Arbitrum DAO is also considering learning from the practices of technology giants to implement mergers and acquisitions to achieve ecological expansion. In May of this year, Arbitrum DAO approved an eight-week MA pilot program proposed by Bernard Schmid, the founding partner of Areta. Marketing companies, business development, infrastructure providers, stablecoin issuers and zero-knowledge technologies are the most attractive potential acquisition targets. If the pilot is successful, Schmid plans to propose a more ambitious proposal: to establish an MA department with a capital pool of $100 million to $250 million and identify and acquire potential targets within two years. DeepDAO data shows that Arbitrum's treasury holdings are worth $2.6 billion, of which 97.4% are tokens ARB, down more than 65.7% from the peak.


It is worth mentioning that Arbitrum also attempts to iterate and update products and governance to optimize developer and user experience. For example, in April this year, the Arbitrum Foundation plans to change the Arbitrum expansion plan to allow new Orbit chains to be deployed on any blockchain; at the end of last month, the Arbitrum Foundation proposed to adopt a new transaction sorting strategy Timeboost to enhance the efficiency and fairness of network transactions; Arbitrum announced that it will launch a function that combines zero-knowledge proof and Stylus MultiVM.


Among the governance proposals, the new ARB staking reward proposal proposed by Arbitrum has a direct stimulating effect on tokens. It intends to use 50% of the sorter fee to reward staking, thereby enhancing the economic security of the DAO and reducing the risk of attacks on the treasury. DeFi researcher @DefiIgnas said that in this plan, 50% of the remaining sorter fees in the future will be used to reward ARB token stakers. Assuming the annual fee is 12,000 ETH and the ARB price is $1, this will translate into a 7% APY. This mechanism of sharing income with token holders is a wise proposal for ARB, which is in a declining state.


From the current perspective, facing the huge unlocking pressure, Arbitrum's ecological subsidy strategy has not yet played a significant role in boosting the ARB price. As the market's controversy over the low circulation and high FDV strategy intensifies, Arbitrum will face greater challenges.


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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