What to expect if Arbitrum’s range formation persists

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.

• $1.15 has been a critical short-term roadblock for ARB bulls. 
• Selling volumes increased amidst a decline in Open Interest rates. 

Arbitrum’s [ARB] strong recovery from mid-June has hit a critical roadblock, forcing it into narrow price consolidation. It hiked 25%, rallying from $0.9200 to $1.15 but faltered near $1.15, forcing it to enter a narrow price range of $1.06 – $1.15. 

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In the meantime, Bitcoin [BTC] cooled off from the recent rally, easing to $30.68k from $31k as of press time. The short-term pullback could derail further uptrend, making the $1.15 roadblock more formidable. 

Is a retest of $1.106 short-term support likely?

Source: ARB/USDT on TradingView

In the second half of May and early June, the $1.06 level was a key support level. But it cracked on 10 June during heavy selling pressure after BTC dropped to $24k. But BTC rebounded, boosted by institutional interest, tipping ARB to flip the $1.06 into support again. 

However, the $1.15 roadblock has thwarted further upside, setting ARB into a narrow-range formation. A mild rally at the time of writing left behind an FVG (fair value gap) of $1.0823 – $1.1062 (white). Below the FVG zone lays the short-term support of $1.064.

Thus, the stretch between the FVG and support could act as a bullish stronghold. If BTC remains bullish >30k, ARB’s pullback will not likely morph into a downtrend. A rebound from $1.064 could be feasible, targeting the range high of $1.15.

Such a move could offer a long opportunity. Further gains could be likely at $1.22 if ARB closes above $1.15. 

The bullish thesis will be invalidated if the $1.064 short-term support cracks. Such a scenario could set ARB to retest $1.0 or $0.92 levels. 

Meanwhile, capital inflows dipped significantly as the CMF (Chaikin Money Flow) dropped below zero. Similarly, the RSI retreated from the overbought zone and crossed below the 50-mark, denoting reduced buying pressure. 

Selling pressure increased; Open Interest rates declined

Source: Coinalyze

The 1-hour chart showed CVD (Cumulative Volume Delta) declined tremendously in the past few days. It reinforces increasing selling volumes and short-term sell pressure. 

How much are 1,10,100 ARBs worth today?

Similarly, the Open Interest (OI) rates, which track the number of opened contracts on ARB’s futures market, have declined from the recent peak of about $150 million to nearly $130 million at the time of writing. It suggests increasing bearish sentiment in the futures market. 

So, a retest of the FVG zone and short-term support were likely, and a rebound could offer new buying opportunities.