Is Arbitrum's Price Surge A Temporary Triumph?

2024-06-05, 06:35

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![](https://gimg2.gateimg.com/image/article/1692587449analysis.jpeg)
## [TL; DR]
On 21 May the Arbitrum token rallied above the $1.17 key resistance level.

The ARB’s red future Ichimoku cloud indicates a strong bearish momentum.

ARB’s 30-day MVRV ratio shows that most Arbitrum token holders may gain if they sell the token when its price is above $1.17.

## Introduction
After the <a href="/id/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> Shanghai upgrade Arbitrum emerged as [one of the leading layer-2 blockchain based tokens](https://www.gate.io/learn/articles/a-deep-dive-into-arbitrum/487 "one of the leading layer-2 blockchain based tokens"), outperforming its Ethereum L2 rival, <a href="/id/price/optimism-op" target="_blank" class="blog_inner_link">Optimism</a>. For example, during the first quarter of 2023 Arbitrum generated $4 million more than Optimism (OP).

For the greater part of 2023 the [Arbitrum token](https://www.gate.io/learn/articles/what-is-arbitrum/204 "Arbitrum token") maintained a higher total value locked than Optimism. For example, as of 13 April Arbitrum’s total value locked (TVL) was $2.27 billion while Optimism had a TVL of $930 million. The focus of this analysis is to look at Arbitrum’s recent price surge. We will also assess if Arbitrum’s bullish momentum may last a long period.

Recent news: [Going beyond the EVM with Arbitrum Stylus](https://www.gate.io/learn/articles/going-beyond-the-evm-with-arbitrum-stylus/3157 "Going beyond the EVM with Arbitrum Stylus")

## Arbitrum's (ARB) Recent Surge past the Critical $1.17 Resistance Level 
On 21 May the [Arbitrum price surged](https://www.gate.io/price/arbitrum-arb "Arbitrum price surged") past $1.17, giving room for most investors to take profit depending on when they acquired their ARB tokens. By the 23rd of May the Arbitrum (ARB) price had reached $1.23.

Based on the current and past cryptocurrency market trends it may not be sustainable for ARB to maintain a price which is above $1.17. The key reason is that any value above that figure falls within a profit-taking zone, thereby attracting a mass sell-off. Already, there is a bearish indication from the token holders as the current market sentiment  shows the ARB holders’ willingness to sell the cryptocurrency.

The [Market Value to Realized Value (MVRV) ratio](https://www.gate.io/blog_detail/2278/fundamental-crypto-analysis-indicators-metrics-and-tools "Market Value to Realized Value (MVRV) ratio") also indicates that the market is in an overbought zone. Basically, the Arbitrum MVRV ratio shows whether or not the asset is in a profitable or loss state at a particular time.

As of the beginning of the fourth week of May the Arbitrum MVRV ratio was 20%, signalling that it was in a profitable state. In such a situation the ARB holders would make a profit if they sell their holdings. In previous scenarios ARB corrections used to occur when the MVRV was between 7% and 24%. The following graph indicates the ARB MVRV situation during the cited period.
 
Read also: [Overview of Arbitrum Layer3 Landscape](https://www.gate.io/learn/articles/overview-of-arbitrum-layer3-landscape-18-orbit-chains-accelerating-the-era-of-multi-chain-in-ethereum-ecosystem/1592 "Overview of Arbitrum Layer3 Landscape")
![](https://gimg2.gateimg.com/image/article/17175691851.jpg)
Arbitrum MVRV Ratio Santiment

Related to the above situation, when the price of ARB surged by 20% during the third week of May many investors started selling their holdings due to the token's profitable state. In other words, realized losses turned into realized profit. The next graph shows how ARB switched from the realized losses to realized gains.
![](https://gimg2.gateimg.com/image/article/17175692102.jpg)
 Arbitrum Network Realized Profits: Santiment
 
## Arbitrum Bullish State: The Reasons behind ARB Price Surge
As said above, during the third week of May Arbitrum gained much pushing its price above $1.21. There were a number of reasons for the ARB price break above the $1.17 critical resistance level.

One of the key causes of the Arbitrum price rally was a rise in the number of new wallet addresses, indicating an increase in network activity. Arbitrum, the layer2 solution for Ethereum, recorded an all-time-high in terms of new wallet addresses on 16 May. It had a record of over 900,000 new wallets, showing a rise in its user engagement. The reason for the influx of new users is an increase in demand for [its DeFi platform](https://www.gate.io/blog_detail/2525/arb-airdrop-interest-in-defi "its DeFi platform") and NFT features.

Another catalyst for the recent Arbitrum momentum and growth was the increase in its network performance. At one time the network processed over 1 billion transactions across Nova and One, positioning itself as one of the best crypto ecosystems. At the moment there are over 600 teams that are developing more than 50 Orbit chains and 2 DAO-governed chains.

Another driver of the recent ARB price spike was the news of Arbitrum DAO’s approval of the plan to pursue mergers and acquisitions (M&A). Currently there is a team that is assessing the possibility of the M&A.

Posting on its blog, [the Arbitrum Foundation said](https://forum.arbitrum.foundation/t/m-a-for-arbitrum-dao/23205 "the Arbitrum Foundation said"), “One of the primary ways for Arbitrum to scalably deploy capital and grow rapidly is to explore M&A transactions, and the upside is potentially massive. Additionally, this is a largely untapped opportunity in crypto, only explored selectively by a few projects in the space; therefore, setting up M&A would enable Arbitrum DAO to set a precedent in the space.”

It added, “The key objective of having an M&A Unit for Arbitrum is to act as a key growth driver for the Arbitrum ecosystem, help the DAO expand non-organically through acquisition opportunities, and cement its position as the leading L2 by productively utilizing its treasury.

Read also: [Who Will Win Between ARB and OP?](https://www.gate.io/blog_detail/3188/l2-stacks-trend-is-rising-who-will-win-between-arb-and-op "Who Will Win Between ARB and OP?")

“This initiative, though being a heavy lift, would set a precedent for the entire crypto space and offers significant upside potential to the Arbitrum ecosystem if executed properly.” Such great news was good enough to generate a bullish momentum that may continue for more days or weeks.

## Technical Analysis: Bearish Shadows Loom
During the third week of May Arbitrum had a bearish indication. Whereas, it had a Greed and Fear reading of 73 it had a volatility of 6.5%. Also, the fact that the Arbitrum price fell from a recent peak of $1.23 to $1.17 showed its bearish nature.

A rise in the bearish pressure would easily push its price below $1.16 or even test lower support levels. To maintain the upward momentum the bulls should not allow the price to fall below $1.17. Instead, they [should buy ARB](https://www.gate.io/how-to-buy/arb-protocol-arb "should buy ARB") in large quantities to force its price to break above the $1.23 level.

Another sign that the bearish momentum may continue is the red future Ichimoku. Generally, if the Ichimoku cloud, also known as Kumo, is red on a higher time frame it indicates a strong bearish momentum which may last for a long period. Despite its present bearish indication, the [CoinCodex ARB price prediction](https://coincodex.com/crypto/arbitrum/price-prediction/ "CoinCodex ARB price prediction") signals that its value may rise by 229.24% to reach $ 3.72 by 1 July.

It is also important to note that a sustained bearish pressure may force ARB to break below $1.101631, $1.081822 and $1.051529 key support levels. On the other hand, if investors buy Arbitrum in large amounts it may break above the $1.151732	, $1.182024 and $1.201833 key resistance levels.

## A Bearish Descent or a Bullish Recovery? Possible scenarios for ARB's price movement
First, some traders believe that ARB is undervalued resulting in a high potential to rise in the near future. As of 29 May the Bollinger Bands was at a stable point, signalling that the ARB price might move sideways as the picture below indicates.
![](https://gimg2.gateimg.com/image/article/17175692793.jpg)
Arbitrum Price Movement - CoinEdition

At that point a bearish push might lead its price to fall below $1.17. On the other hand, a rise in its bullish momentum may push its value above $1.25.

## Conclusion 
The ARB price may not stay above $1.17 key resistance level as a result of the high selling pressure on the market.  Once the price of the Arbitrum token is above that level it is in the profit taking zone which lures many investors to sell their holdings. Also, the MVRV ratio indicates that most  ARB holders can earn profit if they sell the token. The future Ichimoku is also red indicating a bearish momentum.

## FAQs about Arbitrum (ARB)
### Does Arbitrum have a future?
Based on its functionality Arbitrum has a good future since it is an Ethereum layer-2 blockchain. Most layer2 blockchain based tokens are in high demand as they have much utility in the Ethereum ecosystem.
### What is the all-time high price of Arbitrum?
The ARB token attained an all-time high price of $2.39 on 12 January 2024. Its price is currently 53% lower than that of ATH. On the other hand, it has an all-time low of $0.7449, it reached on 11 September 2023.
### Is ARB coin good investment?
The ARB coin is a good investment since it is a layer-2 blockchain based token which normally rallies strongly during bull markets. However, the future of such coins can be affected by emerging crypto regulations.

<div class="blog-details-info">
<div>Author:**Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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