Arbitrum airdrop-related selling subsides, but DApp use sustains while smart money accumulates ARB

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The Arbitrum token airdrop led to a massive dump of ARB tokens and projects in the Arbitrum ecosystem in a “sell-the-news” type of event. However, the Ethereum Layer-2 activity remains strong, with the selling pressure of ARB tokens likely done with, making the rollup well-positioned for further growth.

Arbitrum ecosystem tokens sees sell-the-news type event

The Arbitrum (ARB) airdrop was announced on March 16, which caused a significant uptrend in native token prices of Arbitrum ecosystem projects like GMX (GMX), Magic (MAGIC), Gains Network (GNS) and Radiant Network (RDNT).

The primary reason behind the pump was the ARB airdrop catalyzing the Arbitrum ecosystem’s growth. However, according to a report from An Ape’s Prologue, “this thesis was seemingly front-run,” as the price surge mainly occurred between the period of the airdrop announcement and the actual airdrop on March 23.

The report added, “On the day the airdrop happened, which marked the launch of the $ARB token, the prices of ecosystem tokens began to decline, suggesting a classic ‘sell the news’ event.”

Arbitrum ecosystem tokens after the airdrop announcement (vertical red line) vs. the actual airdrop (vertical blue line). Source: An Ape’s Prologue

Moreover, the Arbitrum airdrop included a 1.1% allocation out of the total ARB’s supply of 12.75 billion for the DAOs in the ecosystem. This was also a reason behind the bullish thesis around the Arbitrum ecosystem, as the DAOs will get a chance to promote usage through ARB incentives.

However, the size of the airdrop for Arbitrum ecosystem projects is significantly less. Only two leading projects, GMX and MAGIC, received values north of $10 million. Most projects received less than $500,000 in ARB tokens, which is inadequate to incentivize liquidity among a large user base.

The Ape’s Prologue report added, “Optimism’s incentives were significantly larger than Arbitrum’s. While $ OP’s governance fund accounts for 5.4% of the total supply, $ARB is just 1.1%.”

User activity and liquidity remains consistent after the airdrop

Nevertheless, the activity across the network continues to surge. The transaction count on Arbitrum, with 2.77 million transactions, was 2.7 times higher than on Ethereum, with 1.08 million on the day of the airdrop.

The number of transactions on Arbitrum. Source: Dune

Since the start of 2023, Arbitrum’s share of transactions among Ethereum, Arbitrum, and Optimism has increased from 12.7% to 30.7%. The trend shows that the high throughput of Layer-2 blockchains is gradually causing a shift from the bulkier and more expensive Ethereum mainnet, where Arbitrum is leading the charge.

The share of transactions count between Ethereum, Arbitrum, and Optimism. Source: Dune

Arbitrum’s DeFi liquidity also skyrocketed to a new all-time high of $2.18 billion after the airdrop. The bulk of the deposit increases was on Uniswap and Arbitrum Exchange via added liquidity pools of tokens paired with ARB.

Arbitrum TVL in DeFi applications. Source: DeFiLlama

It is also encouraging to see that the liquidity across other applications like lending services AAVE and Radiant Network and derivatives trading platforms in GMX and Gains Trade have not declined after the airdrop.

ARB token flows after the airdrop

The ARB token witnessed mass selling on the day of the airdrop, with prices dropping from $10.29 to $1 within hours.

One week after the token’s launch, 87% of the eligible wallets had claimed their airdrops. In comparison, the Optimism airdrop, which was conducted last May, has been claimed by only 63.2% of the addresses. It suggests that the network is close to reaching maximum claims, meaning the selling pressure from airdrop participants could subside.

Related: More than just an airdrop? Arbitrum builds a resilient DeFi fortress with unique primitives

Some “super airdrop hunters” who farmed ARB tokens in bulk with more than one Ethereum address added considerably to the ARB selling pressure. On top of that, there’s no dilution in the token from investors or team unlocks for the next four years.

Nevertheless, there were several whale accumulation reports from on-chain analytics firms LookOnChain and Arkham Intelligence.

The smart money wallets identified by Nansen claimed a total of 15.2 million ARB tokens, representing 1.19% of the total unlocked supply. The smart money marker is used to identify ETH addresses of hedge funds, institutional investments and whales.

The total ARB balance of these wallets is greater than the amount claimed at 15.5 million ARB tokens, meaning smart wallet addresses added additional ARB tokens to their wallets.

Smart money flow of ARB tokens. Source: Nansen

While the Arbitrum airdrop was a “sell-the-news” event for Arbitrum’s native token and its ecosystem projects, the activity and liquidity on the Ethereum Layer-2 network remain strong. With the lion’s share of ARB selling from airdrop participants likely complete, the focus will shift back toward Arbitrum’s growth.