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Is ‘undervalued’ ARB’s bottom finally in? Metrics say…

3min Read

Is this a good time to buy ARB? Well, that’s a difficult question.

Arbitrum

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  • ARB’s key metric presented a buying opportunity on the charts
  • Bearish sentiments retained dominance across the market though

The Market Value to Realized Value (MVRV) ratio of leading Layer 2 (L2) token Arbitrum [ARB] has flashed a buy signal on the charts. In fact, AMBCrypto found that the native token’s MVRV ratio assessed over the 30-day and 365-day moving averages returned negative values, at press time.

ARB MVRV Ratio

Source: Santiment

An asset’s MVRV ratio tracks the difference between its current market price and the average price of every coin or token acquired for that asset. 

When its value is positive and above one, the asset is said to be overvalued. This means that the asset’s current market value is significantly higher than the price at which most investors acquire their holdings. Conversely, a negative MVRV value shows that the asset is undervalued. It suggests that the market value of the asset in question is below the average purchase price of all its tokens that are in circulation. 

It is regarded as a perfect time to buy when an asset’s MVRV ratio is negative because, at that point, the asset trades at a discount relative to its historical cost basis.

No price bottom in sight

A good indicator of whether an asset’s price is due for a rally is when a local price bottom has been reached. This is correctly measured by assessing metrics such as an asset’s Age Consumed.

This metric measures the movement of dormant tokens. For its part, ARB’s Age Consumed metric has projected slightly low values since the beginning of May.

ARB Age Consumed

Source: Santiment

Here, it is important this because it offers insight into the shifts in the behavioral patterns of the token’s long-term holders. This group of ARB holders rarely moves their old coins around, and when they do, it often precipitates a shift in market trends. 

When ARB’s Age Consumed metric spikes, it means that many tokens are changing hands after being left idle for an extended period. On the other hand, when it falls, it means that idle coins are left unmoved. 


Realistic or not, here’s ARB’s market cap in BTC’s terms


Since the beginning of May, ARB’s Age Consumed has returned low values – A sign that its long-term holders have barely moved their tokens around. 

This could also indicate that a price bottom is yet to be reached. Ergo, traders should tread with caution, despite the buy signal flashed by ARB’s MVRV ratio.

Additionally, ARB’s price movements observed on the 1-day chart revealed that bearish sentiments remain significant. 

ARB 1-Day Chart TradingView

Source: ARB/USDT on TradingView

At press time, ARB’s price rested below its 20-day simple moving average (SMA), confirming the risk of further decline.

When an asset’s price falls below its 20-day SMA, it suggests that the short-term trend for the asset is downward. Traders interpret this as a sign that sellers are in control and that the asset’s price will likely continue declining.

Likewise, the token’s Relative Strength Index (RSI) returned a value of 37.31 – A sign that market participants have been favoring ARB distribution over its accumulation.

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Abiodun is a full-time journalist working with AMBCrypto. He is also a lawyer with over 2 years of experience. With a keen interest in blockchain technology and its limitless possibilities, Abiodun spends his time understanding the technology, building projects, and educating people about it.
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