Arbitrum (ARB) price crashed 10% on Wednesday after developers of the Abirtrum-based DeFi project, Chibi Finance, carted away users’ funds worth $1 million. On-chain data flashes mixed signals as the ARB community struggles to come to grips with the network’s latest rug pull. Will Arbitrum’s price recover in the coming weeks?
On June 28, the Arbitrum (ARB) DeFi ecosystem was rocked by yet another rug pull. Blockchain security platform CertiK reported that Chibi Finance devs had deployed a malicious contract that enabled them to steal about $1 million of user funds.
After the news broke, Abritrum (ARB) price retraced below $1.12, but on-chain data currently shows mixed signals for future price action. Which direction will ARB price head next?
Arbitrum Network Traction Has Declined this Week
Arbitrum Network Growth has been in a downtrend this week. And the recent rug-pull incident seems to have exacerbated it even further.
On June 25, Arbitrum recorded 4,663 new addresses. But as highlighted in red below, it has dropped by 35% to just 3,530 at the close of June 28.
Network Growth evaluates the rate at which a blockchain network gains new users by summing up the daily number of new wallet addresses created.
When it declines, it is a bearish signal suggesting that the underlying token may struggle to find new demand in the coming days.
As seen above, the rug-pull event reported on June 28 seems to have done a number on Arbitrum’s Network Growth. But, given the minimal level of the decline compared to the previous day, it is still too early to tell where ARB price will head next.
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Market Sentiment Still Hangs in the Balance
According to market reports, the Chibi Finance (CHIBI) rug pull marks the twelfth exit scam on Arbitrum in 2023. Santiment’s market sentiment data indicate that the community is yet to come to terms with the latest incident.
The chart below shows that at -0.34, ARB Weighted Sentiment sits firmly within the neutral zone. Compared to where it was at the start of the week, it has actually trended upward by 5%, signaling a positive net change in Arbitrum mentions across social media.
Weighted Sentiment gauges the general social perception by comparing the ratio of positive mentions of the project in the media to the negatives. A Weighted Sentiment score near zero is regarded as a neutral zone.
It means the number of positive and negative mentions of Arbitrum is almost at par.
Remarkably, ARB Weighted Sentiment is currently trending upward. This suggests that the community has not yet priced in the widely publicized rug-pull incident.
This neutral disposition can be attributed to Coinbase-backed Circle, launching its USDC stablecoin natively on the Arbitrum network on June 27. It is expected to boost transactional activity and liquidity within the Arbitrum Ecosystem.
This bullish ecosystem development could pull the attention of a large contingent of ARB investors away from the Chibi exit scam.
Given the conflicting signals shown by the on-chain data, ARB is currently in a no-trade zone. Hence, it is too soon to tell if the ARB price will recover in the coming days.
ARB Price Prediction: Bulls Can Regroup Around $1
Considering the factors above, Arbitrum’s price will likely consolidate above the $1 range in the coming days. The MVRV ratio shows that despite the recent price drop, most investors that bought ARB in the last 30 days still hold a 3% unrealized profit.
If the bear seized control, ARB could experience significant support around $1.10 as many holders may avoid slipping into a net-loss position. But if the bearish momentum strengthens, ARB may drop toward $1 before the bulls regroup.
However, if the USDC impact dominates the ecosystem, the bulls can gain control and head for the $1.50 milestone. But first, ABR must smash the potential resistance around $1.20.
Many holders will attain 10% profit in that zone, and they could decide to bank some of it.
Nevertheless, if the bulls can scale that sell wall, then ARB could attain the $1.50 target for the first time in Q2 2023.
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