Arbitrum’s Bullish Pattern: Will It Hold?

Arbitrum’s Recent Performance Overview

Large transaction volumes for Arbitrum have dropped significantly from a weekly high of 342 million to just 93 million. Currently, Arbitrum is trading within an ascending triangle pattern with strong resistance at $0.62.

A decline in DeFi activity and whale inactivity may lead to continued rangebound trading. As of the latest update, Arbitrum (ARB) has been tracking the performance of the broader cryptocurrency market, gaining slightly by 1.2% over the last 24 hours, following a rise in the global market cap.

At press time, ARB traded at $0.558. Over the past week, Arbitrum has remained rangebound between $0.54 and $0.57, amidst a lack of volatility.

Technical Analysis of Arbitrum

The altcoin has formed an ascending triangle on the one-day chart, facing strong resistance at $0.62, despite creating a series of higher lows. This technical pattern is often viewed as bullish, indicating that buyers are slowly gaining strength. However, momentum appears weak, suggesting that ARB may encounter resistance at $0.62 again if buyers fail to step in.

• Relative Strength Index (RSI): The RSI line is below the signal line, indicating bearish momentum is currently in play. The RSI stands at 47, showing that sellers remain in control.
• Chaikin Money Flow (CMF): Although the CMF is still positive, it is trending downward. This indicates that buying activity is not robust; if sellers take control, ARB may drop to test support at $0.48.

Factors Impacting Arbitrum’s Uptrend

Several key factors may impact Arbitrum’s potential uptrend:

1. Whale Inactivity

Data from IntoTheBlock highlights a significant drop in large transactions. The number of large transactions has decreased from a weekly high of over 200 to below 50. Large transaction volumes have also fallen from 342 million to 93 million. Whale activity typically plays a crucial role in driving prices, as large buy or sell orders can significantly influence price movements. Consequently, when these large addresses are inactive, it often leads to rangebound trading.

2. DeFi Activity Slumps

According to data from DeFiLlama, decentralized finance (DeFi) volumes on Arbitrum have dropped sharply over the past week. At the start of the month, DeFi volumes on Arbitrum stood at $813 million, but this metric has since plummeted to $279 million. This decline in DeFi activity points toward decreasing network usage, indicating waning confidence in Arbitrum, which could trigger further sell-offs.

Analyzing Arbitrum’s Liquidity Heatmap

Arbitrum’s liquidity heatmap reveals a cluster of liquidations below the current price, while there is a notable lack of liquidation levels above it. This liquidity heatmap indicates a bearish sentiment, with short positions exceeding long positions. A cluster of liquidation levels below the price could create buying pressure if short sellers are forced to close their positions as the price increases.

However, the prevailing bearish sentiment on Arbitrum remains strong, potentially hindering buying activity. Data from IntoTheBlock shows that 91% of wallets are currently out of the money (in losses), while only 5% are in profit. If the wallets that are currently experiencing losses remain unprofitable for an extended period, their owners may opt to close their positions to minimize losses.