The price of Arbitrum (ARB) has dropped by nearly 20% a week after establishing its record high at $1.60 on March 23. However, the Ethereum layer-2 token looks set to resume its uptrend in the coming weeks.
Polygon price fractal
The cues for a bullish Arbitrum token could be traced back to its Ethereum L2 rival Polygon's market debut.
MATIC (MATIC) started trading on Binance on April 26, 2019, at $0.0026 per token. MATIC/USD rallied nearly 300% to reach $0.0105 on the same day before wiping out 70% of those gains in a market correction by May 9, 2019.
It regained its upside momentum afterward, rallying by nearly 1,350% to $0.045 on May 21, 2019.
The price trajectory reflects a recurring phenomenon involving the launch of digital tokens with seemingly strong fundamental backing, according to independent market analyst Mac.
For instance, Solana (SOL), a layer-1 blockchain, rallied 50,000% before undergoing a similar pump, correction, and sideways consolidation phase after its exchange debut in April 2020.
Arbitrum price could hit $2 by April
From a fundamental perspective, Arbitrum has emerged as a strong contender in the Ethereum L2 space in recent months, with several leading DeFi protocols, including GMX, Uniswap, Sushi and Aave, among its users.
"GMX and Radiant on Arbitrum are two of the fastest-growing protocols in terms of both fundamentals and price appreciation this year," noted Dustin Teander, a researcher at analytics firm Messari, adding:
"Looking at user retention metrics, it’s apparent these protocols have gained above-market traction compared to imported protocols like Uniswap or Aave."
As of March 29, the total value locked (TVL) across Arbitrum pools rose to $2.2 billion versus around $981 million three months ago, according to data resource DefiLlama.
Mac noted that Arbitrum’s strong fundamentals could limit ARB’s downside prospects and prompt traders to re-accumulate the token in the coming weeks.
That may lead to another price run-up, eyeing $2 by April, as illustrated below.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.