ARB holders face a 97% loss, with massive unlocks being the culprit; the Arbitrum ecosystem subsidy strategy has been criticized as unwise
Arbitrum is undoubtedly one of the stronger performers among Layer 2 "top students," but the continuously declining coin price is its "hard injury," even though its circulating market value has already doubled since its launch. At the same time, although several of Arbitrum's metrics still have a leading advantage among many L2s, its ecosystem data is undoubtedly subsidized by a large distribution of tokens, and this approach has yet to have a significant uplifting effect on the ARB price.Author: Nancy, PANews
Arbitrum is undoubtedly one of the "top performers" among Layer 2 solutions with strong data performance, but the continuously declining token price is its "hard injury," even though its circulating market value has doubled since its launch.
Nearly $2.6 billion unlocked in 4 months, 97% of holders are in a loss state
Compared to the initial circulating market value of $1.02 billion at launch, the current circulating market value of Arbitrum's token ARB has exceeded $2.3 billion, but holders are unable to escape the ongoing "blood loss." According to IntoTheBlock data, Arbitrum's price performance is weak, with as much as 97% of ARB holders in a loss state, only 3% of holders at the current price break-even, and almost no holders in profit.
According to CoinGecko data, ARB reached an all-time high of $2.26 in January this year, a 67.4% increase since its launch in March 2023, but then ARB began to decline and recently hit an all-time low, currently down 69% from its peak. However, its circulating market value has only decreased by 30% from its peak. In contrast, ARB's competitor OP has seen a maximum price increase of 235% since its launch, currently down over 65.6% from its peak, with a circulating market value decline of 61.2%.
Arbitrum Circulating Market Value
The prolonged downturn of ARB over the past few months is directly related to its large token unlocks. Since March this year, the Arbitrum team and investors have begun to unlock a large number of ARB tokens. According to PANews statistics, from March to now, the unlocking amount from the Arbitrum team and investors has exceeded 1.38 billion ARB, with a total value exceeding $2.59 billion.
Moreover, Arbitrum will face more ARB unlocks on the 16th of each month, such as the unlocking of the Arbitrum DAO Treasury starting in July, with a value of up to $2.41 billion, expected to increase by about 400% until March 2027. According to Token Unlocks data, as of July 10, the unlocking progress of ARB is currently at 31%.
If market liquidity continues to decline, the ongoing massive unlocks of Arbitrum will undoubtedly drive its token price further down. For example, the crypto analysis platform DYOR recently stated that given the current liquidity, if investment institutions sell 5% of the unlocked amount each month, assets like ARB could potentially drop by 30% to 70%.
Multiple metrics still show leading advantages, ecological subsidy strategy may not save token price
Despite the unsatisfactory price performance, data shows that Arbitrum still holds a leading advantage among many L2s.
According to the latest data from Dune Analytics, as of July 10, the total number of accounts created on Arbitrum has exceeded 31.75 million, and the total number of transactions has surpassed 800 million. The total locked value (TVB) of Arbitrum's on-chain bridging has exceeded 3 million ETH, with approximately 737,000 bridging addresses. Additionally, L2BEAT data shows that Arbitrum One ranks first with a TVL of $16.12 billion, holding a market share of 40.1%; Growthepie data indicates that Arbitrum's stablecoin market value has surpassed $4.07 billion, ranking first with a yearly increase of 116%, exceeding other L2s like Base, OP Mainnet, and ZkSync Era; the growth rate of active addresses in the past six months has reached 205%, surpassing ZkSync and OP Mainnet.
Arbitrum's ecological data is undoubtedly subsidized through a large distribution of tokens.
Arbitrum has consistently leveraged subsidies to support its ecological development. For instance, in gaming, in June this year, Arbitrum approved a proposal for 225 million ARB to fund game development on Arbitrum, aiming to establish Arbitrum as a leading blockchain in the gaming field, with these funds to be distributed over three years; in RWA, Arbitrum plans to allocate 35 million ARB for RWA development, aiming for a 1% annual financial diversification of Arbitrum through the growth of the RWA ecosystem, which has already received over 99% voting support.
At the same time, Arbitrum has been "spending money" to sponsor projects, providing approximately $10.6 million in grants to over 50 projects in 2023 alone. This year, Arbitrum also launched a short-term incentive program aimed at distributing up to 50 million ARB from the DAO treasury to active protocols on Arbitrum, with 106 projects applying for the first round of funding. Additionally, Arbitrum has been continuously supporting various projects financially, such as Open Campus recently announcing it received funding from the Arbitrum Foundation to launch the first Layer 3 blockchain designed for education, EDU Chain; Pendle announced it received 1 million ARB funding from Arbitrum STIP; Synthetix launched an Arbitrum liquidity incentive program, offering 2 million ARB rewards to attract liquidity providers, stablecoin liquidity, and Perps trading activity; Curve Finance claimed to have received over 237,000 ARB donations from Arbitrum to incentivize Curve pools on the Arbitrum chain.
However, Arbitrum's approach of building its ecosystem through token subsidies has also sparked dissatisfaction. The community believes that this method not only fails to empower the token but also increases selling pressure. For example, Continue Capital co-founder Pima stated that many company leaders lack the skills for resource capital allocation, and if the retention of funds is merely for predatory subsidies, it holds no long-term value. The ultimate goal of subsidies is to serve long-term monetizable cash flow. KOL BITWU.ETH remarked that Arb is a typical "low liquidity, high emission" ecological subsidy strategy, ultimately leading to "growing market value, fluctuating token trends." In short, this approach continuously sacrifices the secondary market, making it more suitable for trend traders rather than those who hold for significant returns; the value of these tokens has already been fully explored by institutions, achieving full valuation, with only beta returns in the future, no alpha returns.
Additionally, Arbitrum DAO is considering adopting the practices of tech giants to implement mergers and acquisitions for ecological expansion. In May this year, Arbitrum DAO approved an eight-week pilot merger plan proposed by Bernard Schmid, founding partner of Areta, targeting marketing companies, business development, infrastructure providers, stablecoin issuers, and zero-knowledge technology as the most attractive potential acquisition targets. If the pilot is successful, Schmid plans to propose a more ambitious proposal: to establish a merger department with a fund pool of $100 million to $250 million and identify and acquire potential targets within two years. DeepDAO data shows that Arbitrum's treasury holdings are valued at $2.6 billion, of which 97.4% are ARB tokens, down over 65.7% from their peak.
It is worth mentioning that Arbitrum is also attempting to iterate and update in areas such as products and governance to optimize the developer and user experience. For example, in April this year, the Arbitrum Foundation proposed to change the Arbitrum expansion plan to allow the deployment of new Orbit chains on any blockchain; at the end of last month, the Arbitrum Foundation proposed adopting a new transaction sorting strategy, Timeboost, to enhance the efficiency and fairness of network transactions; Arbitrum announced it will launch features combining zero-knowledge proofs and Stylus MultiVM.
In governance proposals, the new ARB staking reward proposal put forward by Arbitrum has a direct stimulating effect on tokens, proposing to use 50% of the sorter fees as rewards for staking, thereby enhancing the economic security of the DAO and reducing the risk of treasury attacks. DeFi researcher @DefiIgnas commented that in this plan, 50% of the future remaining sorter fees will be used to reward ARB token stakers. Assuming an annual fee of 12,000 ETH and an ARB price of $1, this would translate to a 7% APY, and this mechanism of sharing income with token holders is a wise proposal for ARB, which is currently in a downtrend.
At present, facing the pressure of massive unlocks, Arbitrum's ecological subsidy strategy has yet to have a significant uplifting effect on ARB prices, and as the market's debate over low liquidity and high FDV strategies intensifies, Arbitrum will face greater challenges.
