Arbitrum Investors Are Cautious Ahead of the Biggest ARB Token Unlock Since Launch

Ethereum-based Layer 2 protocol Arbitrum (ARB) fell over 8% on March 14, 2024, ahead of the biggest ARB token unlock since its launch. Over 1.11 billion ARB tokens are scheduled to be released into circulation on 16 March 2024.

The massive ARB token unlock, equivalent to about 77% of ARB’s current circulating supply of 1.45 billion tokens, is causing concerns among investors who fear that ARB will see increased selling pressure following the unlock.

In this article, we analyze the Arbitrum token unlock and share insights on the tokenomics of the ARB token to help you stay ahead of the curve.

Key Takeaways

  • Ethereum L2 Arbitrum will unlock 1.11 billion ARB tokens for investors and team members.
  • Token unlocks are seen as bearish events as they increase market supply and add selling pressure.
  • ARB has underperformed rival L2 tokens, including OP, IMX and MNT, indicating investor caution before token unlock.
  • On the positive side, the completion of the token unlock will remove uncertainty over ARB token.

Arbitrum Token Unlock Analysis: Why and When?

When the ARB token was created in early 2023, only 12.75% of the total supply of 10 billion tokens were airdropped to the community on 23 March 2023.

Over 1.275 billion ARB tokens were airdropped between March and September 2023 to Arbitrum network users and decentralized autonomous organization (DAO) building on Arbitrum.

The remaining ARB supply amounting to 87.25% of total supply or 8.725 billion tokens were allocated in the following manner:

  • Team and contributors – 26.94% or 2.694 billion tokens
  • Investors – 17.53% or 1.753 billion tokens
  • Arbitrum DAO treasury – 35.28% or 3.528 billion tokens
  • Arbitrum Foundation – 7.5% or 750 million tokens

While tokens allocated to the Arbitrum Foundation are coded to unlock “every second” over a period of four years, the tokens allocated to team, contributors and investors will see their first unlock on 16 March 2024.

According to the Arbitrum Foundation, team members and contributors will receive 673.5 million tokens, and investors will receive 438.25 million tokens on 16 March 2024. Thereafter, their remaining token allocation will continue to unlock on a monthly basis over the next three years.

“Only 1/4 of the total vesting for team & investors will unlock initially. Even if they sell all of this portion, it doesn’t mean they don’t trust the project because they still have another 75% vesting and monthly unlocks as cliff along 3 years until 2027,” said tokenomics insight platform Token Unlocks on X.

The current ARB token price of $2, as of 14 March 2024, values the ARB token unlock at over $2 billion.

Offchain Labs – the development team of Arbitrum – is funded by 14 investors, including Lightspeed Venture Partners, Polychain Capital, Pantera Capital, and Mark Cuban, Crunchbase data showed.

source : arbitrum

Market Reaction to Upcoming ARB Unlock

Investors tend to be cautious ahead of token unlocks. These events are considered bearish as it increases the supply of tokens typically leading to a drop in value. Furthermore, token unlocks give team members and investors a chance to book profits from their tokens, which are typically given to them free of cost or at low prices in exchange for their early contribution.

The market has shown a preference towards rival L2 tokens such as Optimism (OP), Mantle (MNT) and Immutable X (IMX) over ARB in the last 30 days, as of 14 March 2024. OP, IMX and MNT have gained +14%,+17% and +48%, respectively, compared to ARB’s -3% drop during the period. Furthermore, ARB token has lost over 15% since hitting an all-time high of $2.4 on 12 January 2024.

Andrew Parkerson, founder and portfolio manager at Brush Creek Digital, tweeted that the recent drawback in ARB prices meant that the massive ARB token unlock “seems a little priced in now.”

“Since this is the first liquidity event for VC investors and the team, and it comes at a $19B valuation, I expect over 90% of these unlocked tokens to be sold,” said Parkerson in a 31 January tweet.

Some whales have already cut their ARB exposure ahead with onchain analysis platform Spot on Chain revealing that two Arbitrum-based DAOs dForce and Synapse Labs have sold all their ARB tokens ahead of the ARB unlock.

ARB Token Analysis

The upcoming ARB airdrop has silver linings. It removes a significant overhang on the ARB token that has adversely affected its market performance. Token unlock-induced price drops could also give long term investors an opportunity to buy ARB tokens at lower prices.

In this section, we summarize ARB’s tokenomics and important market metrics, as of March 14, 2024, for you:

Metric Result Source
Utility Governance Arbitrum Foundation
Initial total supply 10 billion tokens Arbitrum Foundation
Circulating supply 1.451 billion tokens Token Unlocks
Market cap $3 billion Token Unlocks
Fully diluted value $20.7 billion Token Unlocks
All-time high $2.4 Coinbase on TradingView
Inflation target Max 2% per year Arbitrum Foundation
Whale concentration 50.87% IntoTheBlock
Year-to-date gain +30% Coinbase on TradingView

The Bottom Line

Token unlocks are part and parcel of the cryptocurrency markets. Investors have to be aware of these events and plan their investment strategies accordingly to avoid being blindsided by the market. There are several other token unlocks coming up later this month, including Apecoin (APE) and dYdX (dYdX). You can find more information about them here.

Always do your own research before investing. Cryptocurrencies are extremely volatile and considered risky investments. This article should not be considered investment advice and is for information purposes only.

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