Arbitrum (ARB) appears poised for a potential rally, yet the market exhibits mixed signals, prompting both optimism and caution among investors.
- According to analysts’ charts, ARB is now trading within a falling wedge pattern, signaling the potential for a rally to the upside.
- Other metrics, however, give mixed signals about what to expect from ARB in the coming days.
Over the past month, Arbitrum [ARB] recorded a solid 23.13% gain in an effort to regain balance after a notable drop. Yet, in the last 24 hours, it has struggled to sustain its momentum, achieving only a modest 1.37% increase.
There is some optimism in the market with the formation of a positive pattern. But will ARB take the bullish path? COINOTAG explores this further.
Falling wedge positions ARB for a rally
Crypto analyst Alex Clay has identified a falling wedge pattern in ARB’s price action—a classic bullish formation where prices consolidate downward before an upward breakout. Historically, this pattern has yielded gains of up to 82.24%.
ARB recently broke out of this pattern, signaling the potential for further upside. Clay’s chart highlights three key targets: $1.250, $1.830, and $3.650.
Supporting this outlook, the Relative Strength Index (RSI) is forming a rounding bottom as it trends into positive territory. This suggests ARB is entering a favorable zone for continued gains.
Clay expressed optimism about ARB’s prospects, stating, “As $ETH recovers, I am looking for its leading Layer 2 projects [like ARB] to rise as well.”
How ETH recovery could drive Arbitrum price rally
Ethereum’s price recovery is likely to significantly influence Layer 2 tokens like ARB, which depend on Ethereum’s performance for growth.
In the past week, ETH has begun its recovery, drawing renewed interest from traditional investors. Data from Sosovalue reveals that ETH spot ETF saw its largest single-week inflow, totaling $515.17 million—a clear indication that investors are accumulating the asset.
Source: Sosovalue
If ETH sustains this upward trajectory, the positive momentum is expected to extend to Ethereum-reliant assets like ARB. This would not only improve market sentiment but also serve as a strong catalyst for ARB’s price rally.
Conflicts among on-chain trading activities
A notable conflict is emerging in on-chain trading activities for ARB. On the one hand, the Funding Rate, which tracks the market cohort managing the disparity between spot and futures prices, indicates that buyers (long positions) are driving the market.
As of this writing, the Funding Rate stands at 0.0192%, reflecting bullish sentiment that suggests the market is likely to maintain its upward momentum.
However, a significant positive Exchange Netflow of ARB has been observed across both daily and weekly timeframes, signaling that market participants are transferring their holdings to exchanges—typically a precursor to selling.
Source: Coinglass
Over the past week, $1.95 million worth of ARB has been moved to exchanges, with $1.44 million transferred in just the last 24 hours. If this trend continues, it could exert substantial downward pressure on the asset, countering the current bullish outlook.
Conclusion
In summary, while there are promising signs for Arbitrum in the context of Ethereum’s recovery and the identified bullish patterns, investors should remain wary of conflicting on-chain signals that could introduce volatility. Monitoring these developments closely will be crucial for anyone considering an investment in ARB as it navigates these complex market dynamics.
