Arbitrum (ARB) - What is the reason for the recent price increase?

In one month, ARB's price has risen more than 27.18%. The increase did not come out of the blue, but was due to good news surrounding the network and market sentiment. You can read more about it below.

Table of Content

1. Arbitrum's staking mechanism
2. Issue of 50 million ARB to protocols.
3. General market sentiment
4. Arbitrum outlook
5. ARB prediction
6. Conclusion

Arbitrum's staking mechanism

From Oct. 30 to Nov. 6 was an important period for the Arbitrum community. During that time, community members were able to vote on a proposal involving the integration of an ARB staking mechanism. The vote brought a clear outcome: there will be a stake mechanism on the Arbitrum network that allows users to earn returns on their ARB tokens. The majority, 66.76% of the voters, supported the creation of a staking fund with 100 million ARB, while 33.25% voted against.

Currently, the treasury of the Arbitrum DAO is growing rapidly, but the benefits of this are not currently shared with token holders. The treasury currently holds as many as 3.54 billion ARB tokens. The intention is to use some of this to pay out to those who lock in their ARB for a longer period of time.

During this time period, investors of these digital currencies can expect returns that fluctuate somewhere between 7.8% and a striking 78%, depending on the total amount of tokens they stake. To take advantage of this, they should lock in their ARB tokens for a full year in an attached smart contract.

Issue of 50 million ARB to protocols.

As recently as September, there was a proposal to distribute ARB tokens to active Arbitrum protocols. With this, the Arbitrum developers want to create a dynamic ecosystem by encouraging the use of Arbitrum dApps. The incentive should ensure network growth, higher liquidity and more transactions within the Arbitrum ecosystem. The proposal involved two rounds of voting and, as with the Arbitrum staking proposal, there was a clear winner. 65.7% of voters voted to issue 50 million ARBs, while 34.3% voted to issue 25 million ARBs. The 50 million ARB will be distributed to 29 selected protocols and will likely be fully distributed by the end of January 2024.

The news led to many new entrants on platforms of the Arbitrum network. For example, on the DEX GMX alone, the number of ARB tokens redeemed increased by 20% in 30 days.

General market sentiment

Besides good news surrounding the Arbitrum ecosystem, current market sentiment is also playing an important role in the recent price increase. In a previous blog we explained why Bitcoin performed well last month. Among other things, the positive news surrounding BlackRock's Bitcoin ETF caused a turnaround in market sentiment, allowing the entire crypto market to benefit from Bitcoin's price rise. Not just Arbitrum, but almost the entire top 100 on CoinMarketCap is in the green compared with a month earlier.

Arbitrum outlook

Can Arbitrum continue down the line? This is a question that is difficult to answer. What can be said is that Arbitrum's developers have a clear vision and are working with the community to try to move the network forward. The proposals have led to an increase in the number of transactions, an increase in Total Value Locked and an increase in the number of users, which has indirectly led to the price increase.

Currently, there are three proposals that will be decided in the near future:

The Arbitrum Coalition

This proposal expires in two days and requests 2.2 million ARB to establish a coalition to ensure that future proposals are implemented more quickly. The colaition will consist of Blockworks Research, Gauntlet and Trail of Bits and will work on behalf of Arbitrum DAO if approved. Right now, it looks like the coalition is coming, as 56.47% approve of the coalition. 41.8% oppose the coalition.

Bringing security proposals together in an RFP process

This proposal expires as well as in two days and is intended to initiate an RFP (Request for Proposals) process for security services within the Arbitrum ecosystem. The proposal lays the groundwork for attracting security service providers through a transparent and efficient selection process based on established criteria, such as experience, qualifications and methodology. The Arbitrum DAO will appoint a special committee that will be responsible for overseeing this selection process. We can conclude that the RFP process is going to happen, as currently 99.46% indicate they are open to the RFP process.

Non-institutional AIP: Arbitrum Security Enhancement Fund

With this proposal they want to award Cyfrin $2 million to enhance security in the Arbitrum ecosystem. The intended funding will be used to establish the Arbitrum Security Enhancement Fund, which seeks to sponsor audits for projects within the Arbitrum network.

This proposal also expires in two days, and this time the community does not seem to be behind the idea. Currently, 63.48% are against the proposal and only 21.71% are in favor.

ARB prediction

Curious about what ARB could be worth in the future? In our Arbitrum prediction blog we analyze Arbitrum's share price and analysts' prediction.

Conclusion

Recent events in the Arbitrum ecosystem have led to an increase in prices. Events included the approval of an ARB staking mechanism with broad support from 66.76% of voters. There was also an issuance of 50 million ARB of active protocols to boost the ecosystem, leading to increased activity on the Arbitrum network. The current favorable market sentiment has also contributed to the price increase of ARB and other cryptocurrencies. The future of Arbitrum includes ongoing proposals, such as establishing a coalition and setting up an RFP process for security services, that are expected to be adopted, while a proposal to allocate $2 million for security improvements currently appears to have less support.