Arbitrum Price Bounces at 200-Day Support – 25% Increase Carries ARB Above $1

Key Takeaways

• Over 92 million ARB tokens unlocked on May 16 as part of a linear vesting schedule.
• Arbitrum validated a long-term support area at $0.95 with its ongoing bounce.
• Is the Arbitrum correction over, or is the bounce simply part of a relief rally?

Arbitrum has not performed well in 2024, falling nearly 20% year-to-date. The trend seemingly reversed with a bounce on April 13, but the price lost the majority of its gains throughout the rest of April.

This all changed on May 20, when ARB created a large bullish candlestick and broke out from a short-term resistance area. When combined with the wave count and positive indicator readings, this gives way to the possibility that the ARB correction is finally over, and a new upward movement has begun.

Arbitrum Bounce Could Mark End of Correction

The Arbitrum price fell to a low of $0.86 on April 13. It bounced the same day, creating a long lower wick. While the price returned to the $0.95 horizontal support area in the beginning of May, it created a higher low relative to the price on April 13.

This higher low was also combined with a bullish divergence in both the RSI and MACD (green), something that often precedes bullish trend reversals. As expected, ARB started an upward trend afterward and has increased 25% in the past two days.

The wave count implies the correction is over. Since the January 12 yearly high of $2.41, ARB has completed an A-B-C corrective structure, where waves A:C had an exactly 1:1.61 ratio. This is the second most common ration in these structures.

The final portion of the decrease developed into a truncated ending diagonal, a pattern that often leads to a sharp movement in the other direction, as was the case for Arbitrum.

If the count is accurate, ARB has started a new upward movement that will take it above the yearly high. The first intermediate resistance is at $1.55, created by the previous horizontal support area.

History of Arbitrum Token Unlocks

Token unlocks often have a negative effect on the price of an asset, since they increase the circulating supply. This effect is especially notable in substantial unlocks that increase the circulating supply by over 10%.

Arbitrum will unlock 92.65 million tokens on May 16, which is an increase of 3.5% relative the circulating supply. This is part of a monthly linear vesting schedule that started in April 2024 and will continue until May 2027. Upon completion, 57.2% of the total supply will unlock, a notable rise from the current 24.8%.

The previous such unlock was on April 16, and the price did not react to it. Arbitrum’s biggest unlock so far happened on March 16, when the circulating supply increased by 45% after the release of over 1.1 billion tokens.

The ARB price was already mired in the correction at the time of the unlock. However, it fell by another 50% afterward. This is expected, since previous unlock history implies that sizeable token unlocks have bearish implications for the price. Unlocks that increased the circulating by double digits for SUI and DYDX both had negative effects in the price.

In any case, Arbitrum’s linear vesting schedule will dilute the circulating supply by an almost negligible amount, so it is possible the price will be able to absorb the supply without significant downward pressure.

ARB Approaches its All-Time Lows

The Arbitrum price has fallen since its all-time high of $2.42 on January 11. The price created a lower high on March 8 and accelerated its rate of decrease afterward. As outlined in the previous section, the cliff unlock happened on March 16 (red icon).

Measuring from the all-time high, ARB has decreased by 60%. The Arbitrum price fell to a low of $0.85 on April 13, but bounced afterward, creating a long lower wick (green icon). It is currently in the process of validating the $0.95 area as support. This is a critical horizontal level, since it is the final support area before the all-time low.

Technical indicators support the possibility of a bounce. Both the RSI and MACD have generated notable bullish divergences (green), signs that often precede bullish trend reversals. The fact that they are transpiring inside a horizontal support area increases their significance.

On-chain activity also paints a positive picture for Arbitrum. Out of the Ethereum Layer-2s, Arbitrum leads in monthly decentralized exchange (DEX) volume at $15 billion, followed by Base at $12 billion, Polygon at $4 billion and Optimism at $2.5 billion. Also, its average transaction fees are the lowest at $0.005.

Regardless, we need to examine a lower time frame to confirm whether the price will bounce or not.

Arbitrum Price Prediction: Will Wedge Breakout Trigger a Reversal?

The wave count from the six-hour Arbitrum price chart shows an A-B-C corrective structure (white) ongoing since the all-time high. Giving waves A:C a 1:1.61 ratio provides an Arbitrum price target of $0.89, which has been reached.

The sub-wave count is in black, showing an ending diagonal for the completion of wave C. Considering the extended long lower wick of sub-wave three it is possible that the end of sub-wave five will not be lower. The impending end of the correction is also supported by the bullish divergences and the fact that ARB trades inside a long-term horizontal support area.

A breakout from the wedge would confirm the correction was over. In that case, the closest resistance will be at $1.54. On the other hand, a breakdown from the wedge would mean the ARB price also breaks down from the horizontal support at $0,90, likely taking the ARB price to its all-time low of $0.74.

Arbitrum Correction Could End Soon

The ARB price bounced on April 13 but has lost the majority of gains since the bounce. Nevertheless, it has still managed to hold above its long-term support area. The wave count and indicator readings imply either that the correction is over or that it will be soon, despite the Arbitrum token unlock on May 16. As long as ARB trades above the $0.95 horizontal support area, we can consider the trend bullish.