Arbitrum suffered a big blow during the April 1–2 weekend due to a conflict between ARB tokenholders and the Arbitrum Foundation on the allocation of 750 million ARB tokens worth around $900 million.

On-chain analyst firm Arkham Intelligence shared a report with Cointelegraph mapping the transfer of $50.5 million out of the disputed allocation of 750 million ARB tokens. The report read that,

“Only 50.5 million of those tokens have been moved. 10 million tokens have been sent to be sold on exchanges, 40 million have been loaned to Wintermute and the remaining 500,000 remain untouched in a multisig wallet (labeled Gnosis Safe Proxy).”

On April 3, the Arbitrum Foundation conceded to the community’s opposition and decided to break up the said proposal in question into multiple proposals for allocating the funds for the project’s ecosystem growth.

Another on-chain transfer of 2.694 billion ARB tokens from the decentralized autonomous organization’s treasury to 140 addresses spooked the market. The transfers ranged from 100,000 to 71.6 million ARB per address.

Crypto analytics provider LookOnChain found that one of these addresses transferred its tokens to the Coinbase exchange, meaning it could sell its allocations. These tokens represent the amount allocated toward the team, investors and advisers, which was said to be locked for four years.

Active Crypto Twitter member Ogle responded to the ensuing panic selling by saying, “This is all such a non-story, it’s odd how big a deal you guys are making out of it.” Ogle added that these are probably exchange custodian wallets or Know Your Customer investor wallets bound by the lock-up.

The fear, doubt and uncertainty created during the weekend caused ARB’s price to plunge by 20% from March 31’s peak of $1.44 to lows at $1.10.

Whales are buying ARB

Zachrey Lerangis, head of operations at Arkham Intelligence, told Cointelegraph that the “ARB whale activity over the past week has been balanced.”

Arkham’s analysts recorded $12 million in cumulative ARB whale deposits on exchanges, which indicates selling, compared to $18 million in withdrawals, which is indicative of buying.

Currently, Wintermute is the largest holder and market-making entity for ARB tokens, with a balance of $47 million worth of ARB tokens. Amber Group is the second largest market maker, holding ARB tokens worth $4 million. Both funds have been acting as market makers providing liquidity across various centralized exchanges.

The single largest ARB whale investor, holding 9.94 million ARB tokens worth around $11.7 million, refused to sell despite the fears. The account added a small amount of 111 ARB for 0.07 Ether (ETH) over the weekend. The wallet bought ARB tokens at an average price of $1.25.

However, LookOnChain recorded large sales in two out of the six top six ARB investors. The wallets offloaded 2.054 million ARB tokens worth around $2.45 million.

According to a Nansen update, excluding Wintermute, 64 smart money addresses hold 11.7 million ARB tokens worth around $14.04 million. Smart money accounts are flagged by Nansen, representing the most active and prolific traders.

The holdings of smart money wallets are still greater than the total claims made by these wallets in total, suggesting that smart wallets are holding their buys. The number of smart money wallets holding ARB tokens has been consistent.

Additionally, crypto analysts from Messari found an interesting statistic showing the increase in the stablecoin inflow to Arbitrum. An increase in stablecoin supply in an ecosystem strengthens its buying power.

Despite the AIP-1 fiasco, Arbitrum had its second largest inflow of stablecoins since the airdrop announcement yesterday (April 2).

Since March 16, 2023, ~$490 million of stables have flowed into Arbitrum. pic.twitter.com/z3tvBdFpt1

— Average Joe’s Crypto (@AvgJoesCrypto) April 3, 2023

Technically, the ARB/USD chart looks bullish as sellers failed to break below the March 28 lows of $1.11 despite the FUD around the misappropriation of funds during the weekend.

Ten days since the token launch, around 90% of the airdrop has been claimed by recipients. The adverse impact of the governance drama during the weekend likely motivated remaining airdrop holders to sell their holdings. However, the conviction of whales and the increase in Arbitrum ecosystem’s buying power is encouraging for the growth of the Ethereum layer-2 rollup.