Can a spike in ETH price boost the state of Arbitrum, Optimism
- ARB and OP fell by double digits in the last seven days.
- Traction on the L2 networks has decreased despite an earlier hike a few days back.
OP’s price dropped by 15%, suggesting that the tokens might have hit a local top when they rallied. At press time, OP changed hands at $3.25 despite hitting $4.25 on the 12th of January.
Also, ARB’s attempt at reaching $3 has been stopped, with the price falling to $1.85 in the process.
Optimism and Arbitrum are Ethereum [ETH] scaling solutions. Furthermore, ETH was the major reason the cryptocurrencies rallied. As beta versions of the altcoin, ARB and OP have a strong correlation with ETH.
For instance, AMBCrypto observed that if ETH’s price climbs, the values of the tokens climb harder.
Also, when the price of ETH falls, the others fall much harder. This was evident in the recent nosedive as when ETH decreased by 5.34%, OP and ARB fell by double-digits.
ARB’s further fall might be unavoidable
From the technical perspective, ARB experienced a surge in trading volume when the price climbed from $1.64 to $2.40. This happened between the 10th and 12th of January.
However, the volume of the cryptocurrency has become low, indicating a lack of interest in it.
Also, the price at $1.85 seemed like a crucial zone for the token. If sellers breach the zone, ARB might fall to $1.70 which was the next support area. Indications from the Awesome Oscillator (AO) showed that this was likely.
The AO, at press time, was down to -0.18, suggesting an increasing downward momentum. In addition, the price also closed below the 20 EMA (blue) and 50 EMA (yellow).
This breakdown suggests a bearish trend which could drive the ARB price further down.
OP’s money flow shrinks as L2 adoption decreases
OP’s market structure on the 4-hour chart was similar to ARB’s. A look at the EMAs confirmed the bearish bias for the cryptocurrency. The MACD had also dropped into the negative region, reinforcing the bearish dominance sentiment.
If this remains the same, OP could drop below $3.
Furthermore, the Money Flow Index (MFI) was as low as 6.79. This reading was proof of a lack of capital inflow. So, buying pressure was almost non-existent for the token.
If the candlestick closes below $3.25, OP could head down to $2.50 which was one of its lows in December.
In terms of the Network Growth, on-chain data showed that both Optimism and Arbitrim experienced hikes during the ETF approval period.
Realistic or not, here’s ARB’s market cap in OP terms
At that time, Arbitrum’s Network Growth jumped to 8343 while Optimism increased to 19,000. The increase then, implied that new addresses flocked into the project.
But at press time, the metric was down on both ends, suggesting that traction had become low and demand was not as heightened as it was before.