Here’s how stablecoins might hinder Arbitrum’s growth

• Declining stablecoin inflows on Arbitrum raised concerns about its growth and DeFi sector.
• Collaboration in gaming sector and dApp activity offer potential avenues for growth.

Arbitrum[ARB], a protocol that has witnessed substantial expansion since the beginning of the year, has emerged as one of the most prominent players in the crypto space. Despite market volatility, both the protocol and its token experienced remarkable growth. However, recent data suggested a significant decline in stablecoin inflows on Arbitrum, raising concerns about its potential impact on the protocol’s growth trajectory.

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A little unstable

The decreasing trend of stablecoin inflows on the Arbitrum protocol holds several implications. Firstly, it hints at a potential shift in user behavior, indicating a reduced inclination towards transacting with stablecoins on the platform. This decline may signify a decrease in demand for stablecoin-based activities within the protocol, potentially impacting its DeFi sector.

Source: DeFi Llama

Furthermore, the decline in stablecoin inflows can affect the overall liquidity available on the Arbitrum protocol. With fewer stablecoins being deposited, trading opportunities may be limited, leading to decreased market depth.

Additionally, arbitrage opportunities could become restricted, and borrowing and lending activities might be affected as stablecoin inflows decrease.

How are dApps performing?

A decline in stablecoin volumes can result in reduced trading volumes on the Arbitrum protocol, potentially affecting user activity and impeding the protocol’s growth momentum. Despite this decline, certain dApps on Arbitrum, such as Parawswap and MUX, observed significant spikes in transactions, highlighting ongoing dApp activity on the network.

Source: Artemis

However, it was noteworthy that the total value locked (TVL) and decentralized exchange (DEX) volumes on the Arbitrum network experienced significant drops in recent months.

Source: Defi Llama

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

Arbitrum’s collaboration in the gaming sector presents an opportunity to attract more users to the network and improve the TVL on the protocol. According to a recent tweet, Reboot Protocol is partnering with pixelvaut to launch its flagship game on the Arbitrum network. These partnerships could serve as catalysts for growth and help offset the decline in stablecoin inflows.

At press time, the ARB token was trading at $1.217, having experienced a material decline over the past few days. This decline aligns with the decrease in new users holding ARB, indicating a temporary slowdown in interest.

Source: Santiment