Arbitrum [ARB] finds itself entangled in a downward trend, witnessing an 11% decline in its price over the past month. Despite this bearish stance, there are inklings of a potential reversal as ARB swiftly surged from $0.49 to $0.56 in just four days.
Presently, ARB has retraced some of its gains, hovering around $0.551. On-chain data indicates a promising outlook for ARB, hinting at a forthcoming rebound and a possible return to its monthly peak.
Surging DeFi TVL Could Propel ARB’s Upward Trajectory
Arbitrum recently lost its top position in Total Value Locked (TVL) to Base and now stands as the second-largest layer 2 network in terms of TVL.
Data from DeFiLlama reveals a resurgence in decentralized finance (DeFi) activities on the platform, with Arbitrum’s DeFi TVL reaching $2.456 billion, the highest figure in a month.
In addition to the escalating TVL, trading volumes for ARB on both centralized and decentralized exchanges have skyrocketed, marking the highest levels seen since August.
The escalating TVL and increased trading volumes indicate a growing interest in the DeFi protocols operating on Arbitrum’s layer 2 network, potentially bolstering ARB’s recovery.
Noteworthy Surge in Arbitrum’s Open Interest
The surge in speculative activities surrounding Arbitrum is evident through a notable rise in open interest, reaching $135 million at present.
In a span of three days, ARB’s open interest has climbed by more than 10%, suggesting a surge in derivative traders’ interest to take new positions on the token.
An uptick in open interest alongside a price surge typically reflects a bullish sentiment. Furthermore, the predominantly positive funding rates for Arbitrum since September further support this bullish outlook.
Is ARB Ready for a Significant Move?
An examination of Arbitrum’s four-hour chart indicates a recent shift in short-term momentum towards a bullish trajectory. The Chaikin Money Flow (CMF) indicator registers a positive value of 0.07, signaling stronger buying pressure compared to selling pressure.
The Awesome Oscillator also suggests bullish control over ARB’s price movements, with the AO bars turning positive.
Nevertheless, these indicators warrant caution. The southward movement of CMF implies a diminishing buying pressure, while the appearance of a red AO bar indicates a struggle for control between bulls and bears.
If new buyers enter the market at current price levels and Arbitrum surpasses the $0.57 resistance, the subsequent target would be the 1.618 Fibonacci level at $0.62.
Conversely, if ARB succumbs to the prevailing bearish trends and breaches the support at the 0.618 Fib level ($0.53), a potential drop to accumulate liquidity at $0.48 could ensue.
The Arbitrum long/short ratio hints at traders heavily favoring a downward movement, with the ratio standing at 0.75, indicating that 57% of traders have opened short positions. This reflects a reduced sense of optimism regarding the sustainability of the bullish indications surrounding ARB.