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Arbitrum, a prominent Layer-2 network built on Ethereum, faced a decline in its native cryptocurrency ARB compared to other leading Layer-2 assets recently. This dip coincides with two significant forthcoming events expected to impact its price.
Prior to these events, SpotOnchain noted two large holders selling approximately 3 million tokens for $6 million.
Ethereum’s Dencun Upgrade
On March 13, Ethereum is set for its next significant upgrade, the Dencun upgrade. This is anticipated to bring about a shift towards lower costs for Layer 2 blockchain networks.
Market analysts have underscored the importance of this upgrade, suggesting it could empower Layer-2 networks like Arbitrum to better compete with Layer-1 chains such as Solana.
“If successful, the upgrade will guarantee cost-efficiency and speed, and as such Dencun holds the potential to onboard even more digital asset entrepreneurs in addition to the thousands of protocols currently running on top of Ethereum,” crypto firm Nexo wrote.
Arbitrum has demonstrated readiness for this crucial upgrade by implementing ArbOS 20 Atlas, which introduces the Dencun upgrade to Arbitrum chains on Arbitrum Sepolia, a testnet chain resembling Arbitrum One mainnet features.
This move indicates the network’s readiness to adopt Ethereum’s latest upgrade. According to data from DeFillama, the total value of assets locked on the Arbitrum network stands at $3.6 billion, making it the largest Ethereum-based Layer 2 network.
$2 Billion Arbitrum Token Release
Three days following the Dencun upgrade, Arbitrum will experience a significant token release event that will double its circulating supply.
Data on Token Releases reveals the unlocking of 1.1 billion ARB tokens, representing 77% of the circulating supply and valued at $2.38 billion. The team and advisors will collectively receive 673.5 million ARB, valued at approximately $1.44 billion. Meanwhile, investors anticipate receiving 438.25 million ARB, totaling $937.86 million.
This event holds considerable significance for Arbitrum and could impact investor sentiment. Typically, investors perceive token releases as a bearish event that may increase selling pressure on the market.
Indeed, Arbitrum’s ARB performed weakest among the top five L2 tokens, experiencing a decrease of over 2% during the reporting period. Meanwhile, the sector as a whole recorded an average gain of 3.8% over the same timeframe.