- The recent movements in Arbitrum’s governance token, ARB, have drawn significant attention, especially given its near-record low price.
- Despite the declining price, ARB’s market capitalization has paradoxically expanded, defying typical market behavior.
- Noteworthy is the 75% growth in ARB’s market capitalization, now standing at $2.23 billion despite the token’s price slump.
Discover the unusual dynamics shaping Arbitrum’s governance token, ARB, as increasing market capitalization defies its price decline.
Market Capitalization Surges Despite Price Decline
In an intriguing market anomaly, ARB’s market capitalization has expanded significantly even as its price trends downward. Over the next three years, 36% of Arbitrum’s total token supply will be unlocked, contributing to this phenomenon. Currently, the circulating supply is pegged at around 2.9 billion tokens.
Data from CoinGecko reports a 24% decline in ARB’s price over the past year, bringing it to $0.816, just a fraction above its all-time low of $0.74. Yet, in the same period, ARB’s market cap has surged from roughly $1.27 billion to its current value of $2.23 billion.
Typically, a cryptocurrency’s market capitalization increases when its price and circulating supply remain steady. However, ARB’s case is unusual as its market cap grew owing to a substantial surge in its circulating supply, despite a falling token price.
Impact of Token Unlocking on ARB Price
The growth in ARB’s market cap is closely tied to the unlocking of previously frozen tokens, preventing early investors from mass selling. In a significant move last March, Arbitrum unlocked a record 1.13 billion ARB tokens, marking the largest token release in the past year as per Unchained.
According to Arbitrum’s governance policy, this trend will continue with monthly token unlocks scheduled until 2027, each averaging around 108 million ARB tokens. This will add up to an additional 3.6 billion tokens being introduced into the market, supplementing the current 6.4 billion unlocked tokens. At current prices, these unlocks could potentially introduce assets worth around $83 million to the market every month, excluding the March 2024 unlock.
The recent and upcoming token unlocks are allocated to the Arbitrum Foundation, Offchain Labs, and investors. Following the initial airdrop and major unlock in March, ARB saw a price drop of nearly 64% from a local high of over $2.15.
Conclusion
The dichotomy between ARB’s price downturn and the market capitalization growth underscores the significant impact of token unlocks on the token’s market dynamics. As ARB’s price grapples to regain stability, the rising circulating supply continues to drive its market cap growth. Monitoring these unlocking events will be vital as they are poised to shape ARB’s valuation and performance in the foreseeable future.
