Last week, Arbitrum (ARB) price made considerable gains as the bulls made multiple attempts to reclaim the $1.20 zone.
However, a deep dive into the on-chain data shows that the bears are now firmly in control. Will they force a downswing to validate the $1 Arbitrum price prediction?
Network Traction Has Not Translated into Economic Activity
While Arbitrum has made headlines for its growing adoption and increased network activity, this has not translated into a commensurate increase in economic value. In fact, the largest whale cohort in the Arbitrum ecosystem is now taking bearish positions, which raises the question of how far the ARB price could drop.
Active Addresses Soar, But Transaction Volume Plummets
Data shows that the number of active addresses on the Arbitrum network has soared by 41% between May 8 and May 22. However, daily ARB transaction volume has dropped by 92% during the same period. This negative divergence could be interpreted in different ways.
On the one hand, the increase in active addresses suggests that a growing number of individuals or entities are participating in the Arbitrum network.
However, the decrease in transaction volume could imply that these new participants are not conducting transactions at the same frequency or volume as existing users.
On the other hand, it is also possible that the active users are performing non-transactional activities other than the traditional value exchange.
For example, they could be testing new decentralized applications (dApps), swapping tokens, staking, or participating in governance voting.
Unless Daily ARB Transaction Volume Increases, ARB Holders Could Witness a Considerable Price Drop
Ultimately, it appears that the majority of the active users on Arbitrum are utilizing other platform features that don’t involve direct transactional value transfers. Unless daily ARB transaction volume increases, ARB holders could witness a considerable price drop in the coming days.
The Largest ARB Whales Have Started Selling
The most influential Arbitrum whale cohort, which holds balances of 10 million to 100 million ARB tokens, has started another sell-off.
After two weeks of holding steady, the chart below shows how they have offloaded over 130 million ARB between May 17 and May 22.
At the current market price of $1.12, the tokens sold are worth approximately $145 million. It is worth noting that a large chunk of the recent $120 million Airdrop went to this cluster of large institutional investors. It appears that they are now cashing in. Considering these whales’ influence on price, ARB could drop below $1 if they keep selling.
ARB Price Prediction: Another Retracement Below $1?
The Market Value to Realized Value (MVRV) ratio, which evaluates the financial position of current Arbitrum holders, suggests that a drop of $1 is the most likely ARB price prediction.
Most investors that bought ARB in the last 30 days are 6% underwater. Historical data suggest ARB holders could continue to sell until the price drops by another 8% toward $1. And if the $1 support cannot hold, ARB could drop further toward $0.90.
Bottom Line
The on-chain data suggests that the bears are now firmly in control of the Arbitrum market. Unless daily ARB transaction volume increases, ARB holders could witness a considerable price drop in the coming days. The most likely price target is $1, but if the $1 support cannot hold, ARB could drop further toward $0.90.
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