After the Arbitrum AirDrop , a large number of ARB tokens and projects in the Arbitrum ecosystem encountered a kind of “selling truth” event. However, Ethereum's layer 2 activity remains strong, with ARB token selling pressure being resolved, making the Rollup well-positioned for further growth.
"Selling the truth"
The Arbitrum (ARB) AirDrop was announced on March 16, triggering a significant uptrend for the native token price of Arbitrum ecosystem projects such as GMX (GMX), Magic (MAGIC), Gains Network (GNS). and Radiant Network (RDNT).
The main reason for the pump is the ARB AirDrop that catalyzes the growth of the Arbitrum ecosystem. However, according to a report from An Ape's Prologue, “this argument seems to be running ahead,” as the price increase mainly occurred between the time of the AirDrop announcement and the actual AirDrop on March 23.
The report adds:
“On the day of the AirDrop , which marks the launch of the ARB token, the price of tokens in the ecosystem began to drop, indicating the classic “sell of truth” event.
Tokens in the Arbitrum ecosystem after the AirDrop announcement (red vertical line) versus the actual AirDrop (blue vertical line) | Source: An Ape's Prologue
Furthermore, the Arbitrum AirDrop allocates 1.1% of the total supply of 12.75 billion ARB to DAOs in the ecosystem. This is also a reason for the optimistic argument surrounding the Arbitrum ecosystem, as DAOs will have the opportunity to promote usage through the ARB incentive.
However, the size of the AirDrop for projects in the Arbitrum ecosystem is significantly smaller. Only the top two projects, GMX and MAGIC, received a value of over $10 million. Most projects receive less than $500,000 in ARB tokens, which is not enough to incentivize Liquidity in a large user base.
The Ape's Prologue report adds:
“Optimism's incentives are significantly larger than Arbitrum's. While OP 's admin fund accounts for 5.4% of the total supply, ARB is only 1.1%.
User activity and Liquidity remain consistent after the AirDrop
However, online activity continues to increase. The number of transactions on Arbitrum (2.77 million transactions) was 2.7 times higher than Ethereum ( 1.08 million ) on the day of the AirDrop.
Number of transactions on Arbitrum | Source: Dune
Since the beginning of 2023, the transaction rate of Arbitrum on Ethereum, Arbitrum and Optimism increased from 12.7% to 30.7%. The trend shows that the high throughput of layer 2 blockchains is slowly taking over from the bulkier and more expensive Ethereum Mainnet , where Arbitrum is leading in fees.
Transaction rate calculated between Ethereum, Arbitrum and Optimism | Source: Dune
Arbitrum's DeFi Liquidity also jumped to a new all-time high of $2.18 billion after the AirDrop. Most of the increased deposits were on Uniswap and Arbitrum Exchange through the additional Liquidity pool of tokens paired with ARB.
TVL Arbitrum in DeFi Applications | Source: DeFiLlama
It is also encouraging that Liquidity on other applications such as lending services AAVE and Radiant Network and Derivatives trading platforms GMX and Gains Trade did not decrease after the AirDrop.
ARB tokens are released after the AirDrop
The ARB token was mass-sold on the day of the AirDrop and the price dropped from $10.29 to $1 in a few hours.
One week after the token launch, 87% of the eligible wallets requested their AirDrop . For comparison, the Optimism AirDrop conducted in May last year only had 63.2% of addresses requesting. As such, the network is close to reaching the required maximum, which means that selling pressure from AirDrop participants could ease.
Some “super AirDrop hunters” farmed large quantities of ARB tokens with more than one Ethereum address significantly increasing the selling pressure of ARBs. On top of that, no token dilution from investors or unlocking team for the next 4 years.
However, there have been a number of cumulative whale reports from on-chain analytics firms LookOnChain and Arkham Intelligence .
Another whale 2.42M $ARB ($3M) from #Binance and #OKX 3 hours ago and received 2.32M $ARB ($2.88M) from another address.
Then added 1,725 $ ETH ($3M) and 3.74M $ARB ($4.64M) on #Uniswap to provide liquidity.
Seems like whales are buying $ARB . https://t.co/1WtPm6n3lx pic.twitter.com/B5Tb32xUw3
— Lookonchain (@lookonchain) March 27, 2023
“Another whale withdrew 2.42 million ARB ($3 million) from Binance and OKX and received 2.32 million ARB ($2.88 million) from another address.
Then add 1,725 ETH ($3 million) and 3.74 million ARB ($4.64 million) on Uniswap to provide Liquidity.
Looks like whales are buying ARBs.”
The smart wallets identified by Nansen claimed a total of 15.2 million ARB tokens, representing 1.19% of the total unlocked supply. Smart coins are used to determine the ETH addresses of hedge funds, institutional investors, and whales.
The total ARB balance of these wallets is greater than the claimed amount of 15.5 million ARB tokens, meaning smart wallet addresses have added additional ARB tokens to their wallets.
Smart money flows into ARB | Source: Nansen
While the Arbitrum AirDrop is a “truth sale” event for the native token and the projects in its ecosystem, the activity and Liquidity on this Ethereum layer 2 network is healthy. With the sale of the majority of ARBs from AirDrop participants likely to have ended, the focus will return to the direction of Arbitrum's growth.
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