97% of ARB holders suffered losses, huge unlocking was the culprit, and Arbitrum's ecological subsidy strategy was criticized as unwise

Arbitrum is undoubtedly one of the Layer 2 "top students" with relatively strong data performance, but its currency price has continued to fall, which is its "flaw", even though the circulating market value has doubled from the beginning of the launch.

Nearly 2.6 billion US dollars have been newly unlocked in 4 months, and 97% of holders are at a loss

Compared with the initial circulation market value of US$1.02 billion at the beginning of the launch, the current circulation market value of Arbitrum token ARB has exceeded 2.3 billion US dollars, but holders cannot escape the trap of continuous "blood loss". IntoTheBlock data shows that Arbitrum’s price performance is weak, with up to 97% of ARB holders currently at a loss, 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, an increase of 67.4% from when it was launched in March 2023. However, ARB then began to fall all the way and hit a historical low recently. Currently It is down 69% from its peak. However, its circulation market value has only dropped 30% from its peak. In contrast, the price of ARB's competing product OP has increased by 235% from the highest price at the beginning of its launch. The current price has dropped by more than 65.6% from the peak, and the market value of circulation has dropped by 61.2% from its peak.

Arbitrum流通市值

ARB’s decadent trend that has lasted for several months is directly related to the unlocking of large amounts of its tokens. In March this year, the Arbitrum team and investors began to unlock a large number of ARB tokens. According to PANews statistics, since March, the amount of Arbitrum unlocked by the team and investors has exceeded 1.38 billion ARB, with a total value exceeding US$2.59 billion.

And Arbitrum will also face more ARB unlocks on the 16th of every month. For example, starting from July, Arbitrum DAO Treasury will be unlocked, with a value of up to 2.41 billion US dollars. Until March 2027, it is expected to issue approximately 400%. According to Token Unlocks data, as of July 10, the unlocking progress of ARB is temporarily 31%.

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

Many data still have a leading advantage, and ecological subsidies may be difficult to save the currency price

Although the currency price performance is unsatisfactory, from the data point of view, 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 on Arbitrum exceeded 31.751 million, and the total number of transactions has exceeded 800 million. The total amount of TVB bridged on the Arbitrum chain has exceeded 3 million ETH, and the total number of bridged addresses is approximately 737,000. L2BEAT data shows that Arbitrum One ranks first with a TVL of US$16.12 billion, accounting for 40.1% of the market; Growthpie data shows that the market value of Arbitrum stablecoin exceeds US$4.07 billion and ranks first, with an annual increase of 116%, surpassing Base and OP L2 such as Mainnet and ZkSync Era; the number of active addresses has grown 205% in the past six months, exceeding ZkSync, OP Mainnet, etc.

Arbitrum’s ecological data is undoubtedly subsidized by the large-scale currency distribution model.

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

At the same time, Arbitrum is still "spreading money" to sponsor projects, providing approximately US$10.6 million in grants to more than 50 projects in 2023 alone, and this year Arbitrum also launched a short-term incentive plan aimed at A maximum of 50 million ARB funds will be allocated from the DAO treasury to active protocols on Arbitrum, and 106 projects have applied for the first round of funding. This year, Arbitrum has also continued to provide financial support for various projects. For example, Open Campus recently announced that it has received funding from the Arbitrum Foundation to launch the first Layer 3 blockchain EDU Chain designed specifically for education; Pendle announced that it has received funding from Arbitrum. STIP’s 1 million ARB funding; Synthetix launched the Arbitrum Liquidity Incentive Program, providing 2 million ARB rewards to attract liquidity providers, stablecoin liquidity and Perps trading activities; Curve Finance claims to have received over 237,000 Arbitrum ARB donation is used 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. According to the community, this approach not only fails to empower the tokens, but also increases selling pressure. For example, Continue Capital Lianchuang Pima bluntly stated in an article that the leaders of many companies lack the skills to allocate resource capital. If the capital retention is only for predatory subsidies, it has no long-term value. The ultimate goal 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 "continuous growth in market value and fluctuations in token trends." To put it bluntly, this method constantly sacrifices the secondary market and is more suitable for trend traders. It is not the kind of coins that can get huge odds by just grabbing them. The value of these coins has long been mined by institutions and has been fully valued. There will only be beta returns in the future, not 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. Arbitrum DAO approved an eight-week M&A pilot program in May this year proposed by Bernard Schmid, founding partner of Areta, with marketing companies, business development, infrastructure providers, stablecoin issuers and zero-knowledge technology being the most Attractive potential acquisition target. If the pilot is successful, Schmid plans a more ambitious proposal: establishing an M&A unit with a pool of $100 million to $250 million and identifying and acquiring potential targets within two years. DeepDAO data shows that the value of Arbitrum’s treasury holdings is US$2.6 billion, of which 97.4% is the token ARB, which is a drop of more than 65.7% from the peak.

It is worth mentioning that Arbitrum is also trying to make iterative updates in terms of products and governance to optimize developer and user experience. For example, in April this year, the Arbitrum Foundation planned to change the Arbitrum expansion plan to allow on any blockchain Deploy the new Orbit chain; at the end of last month, the Arbitrum Foundation proposed to adopt the new transaction ordering strategy Timeboost to enhance the efficiency and fairness of network transactions; Arbitrum announced that it will launch functions that combine zero-knowledge proof and Stylus MultiVM.

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

From the current point of view, in the face of huge unlocking pressure, Arbitrum’s ecological subsidy strategy has not significantly boosted the price of ARB. As the market controversy over the low circulation and high FDV gameplay intensifies, Arbitrum will face greater challenges. challenge.

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