Ethereum network upgrade and uptick in Arbitrum active users could trigger an ARB price reversal

Moreover, Nansens report shows that ARB airdrop recipients only accounted for around 5% of the activity on the blockchain and that Arbitrum has attracted considerably more new users after the airdrop.

Potential catalysts for ARB upside

Moreover, an upcoming update on Ethereum in the second half of 2023, dubbed as Cancun-Deneb (Dencun), will include EIP-4844 (proto-Danksharding), which will reduce the transaction fees on Arbitrum, increasing the blockchains value proposition.

Additionally, the Arbitrum Foundation recently revealed accumulated data from its sequencer, a part of the layer-2 fees paid by users for posting the data onto Ethereum.

The foundation has decided to pass on the sequencers earnings, totaling 3,352 Ether (ETH), or $5.4 million, to the Arbitrum DAO, and the ETH will be managed by ARB holders.

In total:

The Arbitrum DAO has accumulated ~3,352 ETH in revenue,

The Sequencer will be refunded ~5,954 ETH which is the cost for posting all data to the Ethereum network.

How exciting is that？

— Arbitrum (,) (@arbitrum) May 10, 2023

A revenue source for the DAO — a decentralized autonomous organization — can potentially create yields for ARB holders if the community votes to direct the rewards to holders. It remains to be seen how the funds will be managed by the foundation and the DAO.

“Smart money” is holding ARB

Nansen‘s data shows that the “smart money” and funds that accumulated ARB after the airdrop still haven’t sold, which is encouraging. The on-chain analytics firm tags Ethereum addresses of high-volume and profitable traders as “smart money.”

The funding rate for ARB perpetual swap contracts turned negative like the rest of the crypto market after the Securities and Exchange Commission (SEC) brought lawsuits against the industrys largest exchanges, Binance and Coinbase, per CoinGlass data.

Funding rates are paid by perpetual swap traders for shorting or longing an asset depending on its demand. If the demand for short orders is higher, it is deemed more expensive, so traders on the short side pay longs.

Currently, the funding rates are positive, suggesting that futures traders are bullish on ARB, which raises a yellow flag for late buyers.

The ARB/USD pair has observed a downward trend since the tokens launch in March. The compression of the channel shows the possibility of a descending wedge pattern, which has a tendency to break to the upside. Consecutive daily closes above the wedge could propel the price toward 2023 highs around $1.80.

On the ETH scale, ARB broke below May‘s low of 0.00057 ETH after the SEC’s lawsuits. At the time of publication, the token was trading around resistance level at 0.00060 ETH. A breakout above this level could accelerate ARB further to the upside.

Technically, ARB shows the possibility of a negative trend reversal. Nevertheless, the upcoming Dencun update on Ethereum and decisions taken by the Arbitrum Foundation in directing revenue from the L2 rollup will ultimately dictate ARBs price action.

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This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.