Arbitrum, the cryptocurrency network designed as a scalability solution for the Ethereum blockchain, has recently experienced a notable price correction, resulting in a drop in its native token, ARB. Over the past 24 hours, the token’s value dipped to $1.84, marking a retracement of 5%.
As February draws to a close, attention is now turning to the potential downside price action expected in March as a substantial number of ARB tokens are set to be unlocked.
Major Unlock Event Looms For Arbitrum
According to a recent announcement on X (formerly Twitter), more than 1.11 billion ARB tokens, estimated at $1.24 billion, are scheduled to be released on March 16, 2024.
This unlocking event signifies the beginning of a four-year phased unlocking process, which will gradually release a certain number of tokens every four weeks until 2027.
The total number of tokens in circulation for Arbitrum currently stands at 1.275 billion, meaning the unlock will release an equivalent of 87% of the circulating supply, nearly quadrupling it to 2.375 billion tokens.
Token unlocks, especially when they exceed the average daily trading volume, can act as bearish catalysts for token prices as they introduce additional liquidity into the market. This influx of tokens can create inflationary pressures, leading to increased volatility and speculative trading.
However, to fully understand the potential impact on ARB, it is crucial to examine historical data that sheds light on the token’s price performance following previous unlocks.
According to Token Unlocks data, there has been only one cliff unlock event for ARB tokens in the past. Analyzing the price impact that followed this unlock provides valuable insights.
On the first day after the unlock, the price of ARB experienced a 3% increase, indicating positive market sentiment and initial demand. Subsequently, the token’s price gradually declined, reaching a low of -21% approximately 21 days after the unlock event.
However, at around the 25-day mark, the price began to recover significantly, skyrocketing by 19% above the unlock-day level.
These historical patterns suggest that while ARB may face initial downward pressure following the upcoming unlock, there is a potential for recovery and positive price movement in the following weeks. Nevertheless, it is important to note that market conditions and investor sentiment can vary, and past performance may not necessarily indicate future…
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