Arbitrum’s liquidity surge – Start of a recovery or false signal?

• In the last 24 hours, ARB recorded the highest chain netflow among major blockchains.
• However, transaction sizes have declined, and overall market interest has dropped.

After an 11.91% drop in price last week, Arbitrum [ARB] continued its downward trend at press time. While the daily timeframe showed a smaller 1.10% decline, the sustained price pressure highlighted limited upside potential.

AMBCrypto’s analysis indicated that ARB may face further declines despite its recent network gains, as market participants remained cautious and unconvinced.

Liquidity surge in ARB: A positive sign?

ARB has seen a significant increase in liquidity, with chain netflow spiking to $15.78 million over the past 24 hours, according to Artemis.

This puts it ahead of Ethereum [ETH] and other major blockchains in terms of net asset movement.

Source: Artemis

Chain netflow, which measures the net movement of assets by subtracting outflows from inflows, serves as an indicator of blockchain activity and health.

The recent spike reflected a notable improvement in ARB’s network metrics, which could influence its price direction positively.

However, reduced trading activity and low engagement from market participants leave ARB’s near-term outlook uncertain.

Market activity declines for ARB

There has been sharp decline in market activity for ARB, and that is evident in the significant drop in Active Addresses (AA).

According to data from IntoTheBlock, the number of Active Addresses (AA) has fallen by 24.30% over the past seven days, reflecting reducing interest among market participants.

Source: IntoTheBlock

Additionally, the average transaction size has decreased considerably. At the time of writing, it has dropped from a weekly high of approximately $9,800 to $4,970 in the last 24 hours.

This metric, calculated by dividing the total transaction value by the number of transactions, indicates reduced network activity.

The decline has also impacted the average holding period for ARB, which now stands at 5.4 months.

This suggests that most ARB holders are short-term traders frequently exchanging tokens, reducing the long-term demand for the asset.

Source: IntoTheBlock

Trades in a supply zone

ARB has entered a supply zone on the daily chart, which signaled a bearish outlook for the asset. A supply zone represents a price region with significant selling pressure, which often drives the asset’s value lower.

Source: Trading View

Read Arbitrum’s [ARB] Price Prediction 2024–2025

Currently, ARB is in a supply phase and is projected to decline further, potentially dropping to $0.85, where a liquidity cluster is evident on the chart.

For the token to reverse its trajectory and bounce higher, the market sentiment around the asset would need to shift positively.