Arbitrum Prepares for Monthly Token Unlocks, Raising Volatility and Price Concerns

As per Arbitrum's unlock schedule, approximately 93 million ARBs will be released into circulation each month for the next three years. This unlock pertains to team members, contributors, and investors, with only 25% of their allocation released during the March unlock. Historically, token unlocks tend to induce selling pressure due to the influx of tokens in the market, leading to price drops.

Arbitrum Network Faces Monthly Unlock Schedule, Signaling Volatility and Potential Price Declines

Introduction

Arbitrum, a Layer-2 (L2) scaling solution for the Ethereum blockchain, is poised to face a series of unlocks that will have a significant impact on its token, ARB. These unlocks, which will release a substantial portion of the token's supply, have raised concerns among investors about potential volatility and price decreases in the coming months.

Unlock Schedule

According to Arbitrum's predetermined unlock schedule, a total of approximately 93 million ARBs, valued at $136 million at current market prices, will be released into circulation on a monthly basis over the next three years. This unlocked supply will primarily consist of tokens allocated to Arbitrum team members, contributors, and investors. It is important to note that only about 25% of this total allocation was unfrozen during the previous unlock in March.

Token Unlocks and Market Dynamics

In the cryptocurrency realm, token unlocks often serve as bearish catalysts due to the influx of additional tokens entering the market. This increased supply can lead to increased selling pressure as token holders seek to realize their profits.

Impact of Previous Unlock

The previous Arbitrum unlock event on March 16th had a significant impact on ARB's price. In the days leading up to the unlock, ARB's value began to decline, reflecting investor anxiety over the impending event. Post-unlock, ARB's price continued to fall, with a drop of 26% recorded by CoinMarketCap.

Selling Pressure and Whale Activity

Data from Santiment indicates that large transactions worth over $100,000 began to increase in the period preceding the unlock and continued for nearly a week afterward. This suggests that selling pressure outweighed buying pressure during this time. Additionally, the first two days of April witnessed a surge in whale transactions, resulting in further price declines for ARB.

Whale Holdings

Despite the price declines, data from Santiment also shows that large whale holdings of ARB have increased significantly since the unlock event. This could be attributed to two factors: firstly, the unlocked tokens inflated the wallets of token holders, and secondly, some investors may have taken advantage of the lower prices to accumulate more tokens.

Implications for Investors

The upcoming monthly unlocks for ARB are likely to create a period of volatility and potential downward pressure on the token's price. Investors should be aware of these risks and consider adjusting their investment strategies accordingly. It is important to conduct thorough research and exercise caution when making decisions related to ARB and other cryptocurrency assets.