All about Arbitrum’s declining activity and its potential effects

• Arbiturm saw a high correlation between ARB and user growth on the protocol.
• The activity on the Arbitrum protocol declined. 

Arbitrum [ARB] saw a massive surge in activity over the last few months. Despite the possibility of engaging in farming activities, Arbitrum has successfully carved out a distinct niche within the DeFi landscape, particularly gaining significant traction in perpetual platforms such as GMX_IO.

Is your portfolio green? Check out the Arbitrum Profit Calculator

Even after the hype around its token AirDrop declined, the overall activity on the network remained consistent. This surge in activity contributed positively to the state of the token.

According to Messari’s data, ARB’s market cap seemed directly correlated with the growing number of users on the platform.

Source: Messari

Arbitrum: What goes up…

However, over the last few weeks, activity on Arbitrum has been declining steadily. The number of daily active addresses on the Arbitrum network fell from 600,000 to less than 200,000 in the last month. Subsequently, the number of daily transactions occurring on the protocol also decreased.

Source: Artemis

If the correlation between the token and the protocol remains this high, it could affect ARB negatively in the future.

At press time, ARB was trading at $1.638. Its price declined significantly by 14.56% since 6 May. The Bollinger bands were relatively narrow, suggesting that ARB would not be facing much volatility. The price was trading below the middle line, representing the moving average. This suggested that the sellers were currently in control of ARB’s price.

Realistic or not, here’s ARB’s market cap in BTC’s terms

The RSI was at 48.99 at press time, suggesting a more neutral outlook. The CMF declined to -0.03, indicating a net outflow of money from ARB.

Source: Trading View

Other factors involved

Coupled with these factors, the velocity of the ARB token fell materially over the last month. This suggested that the frequency with which ARB was being traded had fallen. In terms of network growth, there was no improvement observed.

Source: Santiment