The Recent Surge in Arbitrum’s Liquidity Sparks Concerns about Recovery Potential
Following a 11.91% price decline last week, Arbitrum [ARB] continued its downward trajectory as of the latest update. Despite a modest 1.10% drop on the daily timeframe, the sustained selling pressure underscored limited upward opportunities.
Analysis from CryptoCrypto suggested that ARB could witness further declines despite recent network improvements, as participants in the market remained wary and unconvinced.
The Upsurge in ARB’s Liquidity: A Promising Development?
There has been a significant uptick in liquidity for ARB, with chain netflow surging to $15.78 million in the last 24 hours, based on data from Artemis.
This places ARB ahead of Ethereum [ETH] and other major blockchains in terms of net asset movement.
Chain netflow, a metric that gauges the net transfer of assets by deducting outflows from inflows, functions as an indicator of blockchain activity and robustness.
The recent spike indicated a noteworthy enhancement in ARB’s network metrics, potentially influencing its price trajectory positively.
However, the decreased trading volume and limited participation from traders have clouded ARB’s short-term outlook.
Decline in Market Activity for ARB
Market activity for ARB has witnessed a sharp decline, as evidenced by a notable drop in Active Addresses (AA).
Data from IntoTheBlock shows that Active Addresses (AA) have decreased by 24.30% in the past seven days, reflecting waning interest among market participants.
Furthermore, the average transaction size has seen a significant drop, plummeting from a weekly peak of around $9,800 to $4,970 within the last 24 hours.
This measurement, obtained by dividing the total transaction value by the transaction count, signals reduced network engagement.
The decrease has also impacted the average holding duration for ARB, now standing at 5.4 months.
This implies that many ARB holders are short-term traders frequently swapping tokens, diminishing the asset’s long-term demand.
Trading in a Supply Zone
ARB has entered a supply zone on the daily chart, indicating a bearish sentiment for the asset. A supply zone represents a price level with substantial selling pressure, often prompting a decline in the asset’s value.
Currently, ARB is traversing a supply phase and is expected to further decline, potentially reaching $0.85, where a liquidity cluster is apparent on the chart.
To reverse its trajectory and experience an upward bounce, market sentiment towards ARB would need to shift positively.