Home / Analysis / Crypto / Technical Analysis / Arbitrum Leads Way as Ethereum Layer-2 TVL Reaches All-Time High But ARB Price ATH Far Off

Arbitrum Leads Way as Ethereum Layer-2 TVL Reaches All-Time High But ARB Price ATH Far Off

Last Updated May 28, 2024 3:30 PM
Valdrin Tahiri
Last Updated May 28, 2024 3:30 PM

Key Takeaways

  • The combined Total Value Locked (TVL) of Ethereum Layer-2 solutions reached an all-time high on May 27.
  • Arbitrum is leading the way, followed by Optimism, Base, and Blast, all of whom employ optimistic rollups.
  • Arbitrum’s price bounce saved a 205-day horizontal support area, leading to a 20% price increase in May.

The Arbitrum price has fallen nearly 50% since its all-time high price in January. The decrease nearly caused a breakdown from a horizontal support area existing for 205 days.

However, ARB bounced, saving the breakdown and creating a higher low in May. The ensuing increase and breakout allow for the possibility that the correction is over, and the Arbitrum price is headed for new highs.

Layer-2 TVL Reaches New All-Time High

On May 27, Ethereum Layer-2 solutions reached a new all-time high Total Value Locked (TVL) of $47.15 billion. This is an increase of more than fourfold since May 2023, when the TVL was at $10 billion.

Arbitrum is the leader in TVL  with over $19 billion, followed by Optimism at nearly $8 billion and Base close to $7 billion. Blast is in fourth place with $3.36 billion, followed by Mantle, Linea and Starknet. No other Layer-2 has more than $1 billion in TVL. These values also take into account the bridged TVL.

Layer-2 TVL
Layer-2 Total Value Locked | Credit: L2beat

An interesting characteristic is that the four Layer-2s with the highest TVL all employ Optimistic Rollups instead of ZK-Rollups.

On top of leading the TVL rankings, Arbitrum also leads the decentralized exchange volume rankings at $2.64 billion. Only Base comes close with $2.36 billion, while no other solution has more than $1 billion in TVL.

Layer-2 DEX Volume
Layer-2 DEX Volume | Credit: Dune

A potential reason for the increase in TVL comes from the reduction in transaction fees. Arbitrum currently has the lowest transaction fees from Ethereum Layer-2s at $0.006. Blast and Optimism have average transaction fees  nearly six times higher at $0.034 and $0.036, respectively.

Nevertheless, the ARB price has not reflected the growth in on-chain activity. To the contrary, the price has increased by only 20% in May, significantly lower than Ethereum’s 36% increase.

A reason for this could be the massive ARB token unlock in March. Since the effect of the unlock has already been seen, it is possible the ARB price will now begin an upward movement.

ARB Price Bounces at Support

On April 13, ARB reached a low of $0.85, seemingly breaking down from the $0.95 long-term horizontal support area, which has existed for 207 days. The price bounced the same day, creating a long lower wick (green icon) and saving the breakdown in the process.

Then, it created a higher low on May 5 and has increased since. The increase was preceded by a notable bullish divergence in both the RSI and MACD. These divergences often lead to bullish trend reversals, as was the case for ARB.

Arbitrum Price Prediction
ARB/USDT Daily Chart | Credit: TradingView

If the increase continues, the main resistance area is between $1.60 and $1.65. A horizontal area, descending resistance trend line and the 0.5 Fibonacci retracement support level create this resistance.

Arbitrum Price Prediction: Relief Rally or New Highs?

The daily time frame wave count supports the possibility of a reversal, aligning with the bullish price action and indicator readings. Since its all-time high in January, ARB has completed an A-B-C corrective structure (white). In it, waves A:C had an exactly 1:1.61 ratio, the second most common in such structures.

Arbitrum Wave Count
ARB/USDT Daily Chart | Credit: TradingView

The sub-wave count shows that the correction ended with truncation. This is visible in the sub-wave count (black), where sub-wave five did not fall below the bottom of sub-wave three.

Then, the breakout from the descending wedge completed the correction. If the count is accurate, the ARB price will not only increase toward the $1.60-$1.65 resistance area but will break out and move to new highs.

Conversely, falling below the C wave low of $0.90 will invalidate the count. Then, ARB will likely fall to a new all-time low below $0.70.

Arbitrum Correction May Be Over

The ARB price has not yet reflected its dominance in on-chain activity relative to other Ethereum Layer-2 solutions. However, there are bullish signs in place that suggest ARB has completed its correction.

If this is the case, the ARB price may increase considerably in the upcoming months. The main resistance is at $1.60-$1.65, a breakout above which will confirm the correction is over.

Was this Article helpful? Yes No