- Arbitrum crypto price has nosedived from its highest point last week.
- This is in line with how many popular airdrops trade.
- The token will likely get worse before the situation improves.
Arbitrum price has nosedived after the blockbuster airdrop that happened on Wednesday last week. The ARB token was trading at $1.2453 on Monday, about 20% below the highest level last week. This drop has brought the coin’s total market cap to about $1.58 billion.
Why ARB is plunging
There are two main reasons why Arbitrum’s token is plunging. First, broadly, cryptocurrencies are not doing well, with Bitcoin trading at $27,700 and Ethereum moving below the key point at $1,755. Most cryptocurrencies that are tracked by CoinMarketcap are deeply in the red.
This price action is likely because banking stocks, including Deutsche Bank, were doing well on Monday. Recently, cryptocurrencies have done well when banking tensions have escalated.
Second, and most importantly, this price action is in line with how popular tokens trade after an airdrop. In most cases, these tokens tend to rise in their first days and then plunge in the following days. The initial jump is usually because of the hype surrounding the token’s launch.
In the following days, these tokens tend to pull back sharply as initial buyers and holders start selling their stakes for a profit. This is possible because, unlike stocks, there is usually no lock-up period for cryptocurrency airdrops.
A lock-up period is a time when a company’s insiders are not allowed to sell their stocks after going public. It helps to prevent them from selling their stocks, which will boost their supply.
Therefore, the ARB price is falling as many insiders and original holders sell some of their tokens. This selling has then led to more downward pressure, which has hurt its price.
We saw a similar situation happen in Optimism when it launched its airdrop. Initially, the token jumped from a low of $1.034 to a high of $2.31 and dropped a few days later. Today, Optimism’s token has jumped back to over $2.30.
I suspect that Arbitrum’s token will have a similar price action, where it initially drops and then bounces back. Besides, ARB is one of the biggest layer-2 blockchains in the world.
Arbitrum price prediction
In my last article on Arbitrum, I wrote that the token will be a good investment in the long term. I also warned that it will be wise for people to wait for the hype to die before investing in the token. This view was accurate as the token has dropped sharply after its launch.
On the hourly chart, the ARB/USD pair has dropped and moved below the 25-period moving average while the Relative Strength Index (RSI) has continued falling. It has also formed a small double-top pattern.
Therefore, Arbitrum will likely continue falling as sellers target the support at $1 and then resume the bullish trend in the long-term. Some of the top catalysts for the token will be new exchange listings and the performance of its ecosystem.
Contributors
