- 97% of ARB holders are at a loss.
- Arbitrum exploring revenue-sharing proposals.
- Potential value capture for ARB on the horizon.
Despite its popularity as a leading Layer 2 scaling solution for Ethereum, Arbitrum is facing a stark reality: nearly all of its token holders are currently in the red.
This disconnect between the project’s technological success and its token’s price performance raises questions about the sustainability of the current model and underscores the challenges facing even the most promising crypto projects in a volatile market.
Data analytics platform, IntoTheBlock, reveals roughly 97% of Arbitrum (ARB) holders are underwater, meaning they purchased the token at a higher price than its current market value. Only 3% of ARB holders are currently in profit, a dismal record for a top L-2 protocol.
Source: InToTheBlock
Layer 2 scaling solutions like Arbitrum are designed to address the scalability limitations of the Ethereum blockchain by processing transactions off-chain before committing them to the main Ethereum network, resulting in faster speeds and lower fees compared to the ETH mainnet.
Arbitrum has emerged as a popular choice among its competitors, like Optimism and Base. However, the discrepancy between Arbitrum’s strong underlying technology and its weak token price performance highlights the ongoing volatility within the cryptocurrency market. The price of ARB, like any other cryptocurrency, is susceptible to market forces. The profitability of ARB holders could change abruptly depending on future price movements.
Amidst the price slump, market experts see compelling reasons to be optimistic about Arbitrum’s future. According to a Messari analyst, serious efforts are underway to directly benefit ARB holders, thanks to a recent proposal by the Arbitrum DAO.
This proposal aims to introduce a staking mechanism where 50% of future fees would be used to reward stakers, potentially making Arbitrum the first Layer 2 token with a value proposition beyond simple governance rights.
Source: AvgJoesCrypto
Apart from that, the Arbitrum Foundation itself introduced a proposal to capture additional revenue through MEV (Miner Extractable Value), with the possibility of collecting bids in ARB and burning them, effectively reducing supply.
Market experts believe that since the Foundation initiated this proposal, the likelihood of implementation is high. If these proposals succeed, the ARB token will start capturing value, a significant milestone for L2 tokens. While the extent of value capture remains to be seen, this strategic shift toward rewarding token holders is a positive sign for Arbitrum’s future.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
