Ethereum’s Layer-2 scaling solution Arbitrum has been undergoing some major developments recently after the token unlock last Saturday, March 16. The Arbitrum (ARB) price has corrected 25% since then and is currently trading at $1.51.

Arbitrum (ARB) Price and Market Cap Correlation

Arbitrum initiated a “Cliff Unlock” event on March 16, distributing 1.1 billion ARB tokens to investors, team members, and advisors simultaneously. Such an event typically triggers concerns of a market sell-off, causing a notable drop in the native token’s value.

Arbitrum opted for a simultaneous release of all tokens. Of the total, 673.5 million tokens were allocated to advisors and the team, while the remaining 438.25 million tokens were distributed to investors.

On the other hand, Arbitrum’s market cap has surged by a staggering 80% over $4.0 billion in the last 24 hours. The surge in Arbitrum’s market capitalization is due to several factors, including increased adoption and utility within the crypto ecosystem. Despite the price per token being lower compared to previous highs, the overall market capitalization has reached new heights, indicating strong demand and investor confidence in the project.

One crucial aspect that plays a key role here is tokenomics, particularly the inflation rate. For instance, despite Solana’s price per token being lower than its previous all-time high (ATH), its market capitalization has reached a new peak. The ARB token functions with a similar tokenomics.

Inflationary mechanisms involve the periodic release of new tokens into circulation, and achieving all-time high (ATH) prices relies heavily on expanding their market capitalization (market cap) to counterbalance the inflationary pressures.

ARB Token Whale Activity

On March 18, the analytics platform Lookonchain revealed the transfer of approximately 58 million ARB to exchanges. This is only a small fraction of the unlocked tokens. Data shows that 11 large-scale investors, or “whales” were behind these transactions.

This data suggests that while some investors engaged in profit-taking activities, a significant portion of whales opted to hold onto their ARB holdings, indicating sustained confidence in the project’s long-term prospects.

Based on Santiment’s data, transactions exceeding $1 million spiked on March 16, coinciding with the ARB token unlock. Although this could indicate potential selling activity, there was a noticeable increase in wallets holding between 100,000 and 100 million ARB tokens on the same day. This suggests that significant whales may be accumulating ARB despite prevailing market apprehensions.

Significantly, these whales initiated their token accumulation in the days preceding the unlock, coinciding with a downward trajectory in Arbitrum’s prices.

The post Arbitrum (ARB) Price Tanks 25% But Market Cap Hits New ATH, Here’s Why appeared first on CoinGape.

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