Arbitrum (ARB) Hits Rock Bottom, But Market Cap Soars To $2B – What’s Behind This Disconnect?

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As an experienced analyst, I believe that the recent price decline of Arbitrum’s governance token, ARB, is a cause for concern, especially given its proximity to its all-time low. However, I am intrigued by the fact that the market capitalization of ARB has defied this downward trend and witnessed significant growth.

Although the value of Arbitrum’s governance token, ARB, has taken a hit and is approaching its record low, the token’s market capitalization has seen impressive growth. In fact, it has increased by more than 75% to reach a total worth of $2.23 billion.

Market Cap Defies Price Decline

In the following three years, around 36% more of Arbitrum’s entire token stockpile is set to be released. Currently, about 2.9 billion of those tokens are in circulation.

As an analyst, I’ve examined the data from CoinGecko and found that ARB‘s price has dropped by 24% over the past year, now at $0.816 – not far off its record low of $0.74. Surprisingly, despite this price decrease, ARB’s market capitalization has shown significant expansion. It was around $1.27 billion a year ago but has grown to its present valuation.

As a market analyst, I would explain that the market value of a cryptocurrency is calculated by multiplying the current price of an individual token by the total quantity of tokens in existence. Normally, this figure will ascend when the token’s price experiences an upward trend while its circulating supply remains unaltered.

As a crypto investor, I’ve noticed an intriguing development with Arbitrum’s governance token. Although its price has been on a downturn, its market capitalization continues to expand. The reason behind this paradox lies in the substantial rise in the token’s circulating supply.

Token Unlocking Spree Takes Toll On Arbitrum’s Price

Based on Unchained’s analysis, the increase in market value is largely due to the release of formerly restricted tokens. This token unlocking process helps curb significant selling actions from initial investors during the initial phases of a project.

In March, according to our related site NewsBTC’s reports, Arbitrum carried out significant token unlocks, releasing a massive 1.13 billion ARB tokens from their freeze, which represented the biggest unlocking event of the previous year.

As a crypto investor, I’d interpret it this way: Based on Arbitrum’s governance papers, there is a scheduled release of ARB tokens every month, totaling around 108 million tokens in each installment, until the year 2027.

An extra supply of 3.6 billion tokens will be made available on top of the existing 6.4 billion tokens that are currently accessible. Each monthly release, with the exception of the one scheduled for March 2024, carries an estimated value of around $83 million based on current market prices.

After the distribution of the last batch of unlocked tokens, an equal portion will go to the Arbitrum Foundation, Offchain Labs, and investors. Following the airdrop and the initial major token release in March, there has been a significant decrease of approximately 64% for ARB from its peak price of over $2.15.

To put it simply, the price of ARB‘s token inversely affects its market capitalization, highlighting the significant influence of the large-scale token releases on market movements.

The ARB token’s value is having a hard time holding steady, but the expansion of its circulating supply has fueled growth in its market capitalization. The ongoing unlocking process will continue to influence the token’s price and market trends in the near future, making it an important factor to keep an eye on.

Arbitrum (ARB) Hits Rock Bottom, But Market Cap Soars To $2B – What’s Behind This Disconnect?

The ARB token reached a low of $0.745 on Tuesday but has since bounced back, now trading at $0.8160 – a 5% gain over the past 24 hours. Currently, the market capitalization of ARB is valued at $2.36 billion.

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2024-06-20 09:11