The Arbitrum token airdrop caused a massive sale of ARB tokens and projects in the Arbitrum ecosystem in a “sell the news” type event. However, Ethereum layer 2 activity remains strong, and the ARB token selling pressure is likely to have ended, so the rollup is well positioned for further growth.
Arbitrum Token Ecosystem Sees “Sell the News” Event
The Arbitrum (ARB) airdrop was announced on March 16, triggering a significant upward trend in the prices of native tokens from Arbitrum ecosystem projects such as GMX, Magic, Gains Network (GNS) and Radiant Network (RDNT). .
The main reason for the rise was that the launch of ARB catalyzed the growth of the Arbitrum ecosystem. However, according to a report in An Ape’s Prologue, “this thesis was apparently pre-empted” as the price hike occurred mainly between the airdrop announcement period and the actual airdrop on March 23.
The report added: “On the day of the airdrop marking the launch of the ARB token, ecosystem token prices began to decline, suggesting a classic ‘sell the news’ event.”
Additionally, the Arbitrum airdrop included an allocation of 1.1% of the total supply of 12.75 billion ARBs to ecosystem DAOs. This was also one of the reasons for the bullish thesis around the Arbitrum ecosystem, as DAOs will have the opportunity to promote usage through ARB incentives.
However, the amount of the Arbitrum ecosystem projects is significantly lower. Only two of the main projects, GMX and MAGIC, received values above USD 10 million. Most projects received less than $500,000 worth of ARB tokens, which is inadequate to incentivize liquidity among a large user base.
The Ape’s Prologue report added: “Optimism’s incentives were significantly higher than those of Arbitrum. While OP’s governance fund represents 5.4% of the total supply, ARB only 1.1%.”
The activity and liquidity of the users is maintained after the airdrop
However, activity across the network continues to increase. The transaction count on Arbitrum, at 2.77 million, was 2.7 times that of Ethereum, at 1.08 million on the day of the airdrop.
Since the start of 2023, the share of Arbitrum transactions between Ethereum, Arbitrum and Optimism has increased from 12.7% to 30.7%. The trend shows that the high performance of Layer 2 blockchains is gradually causing a shift from the bulkier and more expensive Ethereum mainnet to where Arbitrum is leading the charge.
Arbitrum’s DeFi liquidity also shot up to new all-time highs of $2.18 billion following the airdrop. Most of the increase in deposits occurred on Uniswap and Arbitrum Exchange through added liquidity pools of tokens that have ARB parity.
It is also encouraging to see that liquidity in other applications such as AAVE and Radiant Network lending services and derivatives trading platforms at GMX and Gains Trade have not diminished following the airdrop.
ARB token flows after the airdrop
The ARB token witnessed a lot of selling pressure on the day of the airdrop, with prices falling from $10.29 to $1 in a matter of hours.
Within a week of the token launch, 87% of eligible wallets claimed their airdrops. By comparison, the Optimism airdrop, conducted in May 2022, has only been claimed by 63.2% of addresses. This suggests that the network is close to peaking in claims, which means that the selling pressure from launch participants could ease.
Some “super airdrop hunters” who farmed ARB tokens wholesale with more than one Ethereum address increased the selling pressure of ARB considerably. Also, there is no dilution of the token by investors or team unlocks for the next four years.
However, there were several reports of whale accumulation from on-chain analysis companies. LookOnChain and Arkham Intelligence.
Another whale withdrew 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
The smart money wallets identified by Nansen claimed a total of 15.2 million ARB tokens, representing 1.19% of the total unlocked supply. The smart money marker is used to identify ETH addresses of hedge funds, institutional investments, and whales.
The total ARB balance of these wallets is more than the claimed amount by 15.5 million ARB tokens, which means that the smart money addresses added additional ARB tokens.
Although the Arbitrum airdrop was a “selling the news” episode for Arbitrum’s native token and its ecosystem projects, Layer 2 activity and liquidity on the Ethereum network remains strong. After most of the sale of ARB by the airdrop participants is complete, the focus will once again be on growing the network.
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