The value of Arbitrum’s governance token, ARB, has been falling close to its all-time low. However, its market capitalization has grown by over 75%, reaching $2.23 billion.
In the next three years, 36% more of Arbitrum’s total token supply will be unlocked. Currently, there are about 2.9 billion tokens in circulation. Despite ARB’s price dropping 24% in the past year to $0.816, just above its record low of $0.74, its market cap surged from $1.27 billion to the current valuation.
Normally, a cryptocurrency’s market cap increases when the price rises, and the supply remains the same. However, in ARB’s case, the market cap grew because of a significant rise in the circulating supply despite the falling price. According to Unchained, the market cap growth is due to unlocking previously frozen tokens. These unlocks stop early investors from massive sell-offs in the project's early stages.
In March, Arbitrum unlocked 1.13 billion ARB tokens, the largest in the past year. This process will continue monthly until 2027, with each unlock releasing around 108 million ARB tokens. This will add 3.6 billion tokens to the current 6.4 billion unlocked tokens. At current prices, each monthly unlock (excluding March 2024) is worth about $83 million.
The tokens are allocated to the Arbitrum Foundation, Offchain Labs, and investors. Since the first major unlocks in March, ARB’s value has dropped about 64% from its high of over $2.15. The relationship between ARB’s price and market cap shows the impact of these unlocks on market dynamics.
While ARB struggles to maintain value, the increased supply has boosted its market cap. The ongoing unlocks will continue to influence ARB’s price and market performance. After hitting a low of $0.745 on Tuesday, ARB rebounded to $0.8160, a 5% increase in the past 24 hours, bringing its market cap to $2.36 billion.
Arbitrum’s ARB token is nearing its all-time low, but its market cap has grown due to significant token unlocks. These unlocks prevent early massive sell-offs and increase the circulating supply, which drives up the market cap despite the price drop. The ongoing token unlocks are crucial to watch as they will shape ARB’s future market performance.
