Arbitrum (ARB) Continued Its Downward Trend Despite a Liquidity Surge: Here's Why

After an 11.91% drop in price last week, Arbitrum [ARB] continued its downward trend at press time. While the daily timeframe showed a smaller 1.10% decline, the sustained price pressure highlighted limited upside potential.

After a 11.91% price decrease last week, Arbitrum (CRYPTO: ARB) continued its downtrend on Friday.

Despite posting a smaller 1.10% decline on the daily timeframe, sustained price pressure hinted at limited upside potential.

According to AMBCrypto's analysis, ARB might experience further price decreases despite its recent network gains, as market participants remained largely unconvinced.

Chain netflow and liquidity

Artemis reported that Arbitrum (CRYPTO: ARB) has seen a massive uptick in liquidity, with a chain netflow of $15.78 million in the past 24 hours.

This places ARB ahead of even Ethereum (CRYPTO: ETH) and other major blockchains in terms of net asset movement.

Chain netflow is a metric that indicates the net movement of assets by subtracting outflows from inflows, serving as an indicator of blockchain activity and health.

The recent spike in chain netflow suggests a positive shift in Arbitrum's network performance, which could influence its price direction.

However, it is worth noting that reduced trading activity and low engagement from market participants may limit ARB's near-term outlook.

Active Addresses and average transaction size

IntoTheBlock data reveals a sharp decline in market activity for Arbitrum (CRYPTO: ARB), as evident in the significant drop in Active Addresses (AA).

According to the data, the AA has decreased by 24.30% over the past seven days, indicating diminishing interest among market participants.

Additionally, the average transaction size has also decreased considerably. At the time of writing, it dropped from a weekly high of approximately $9,800 to $4,970 in the last 24 hours.

This metric is calculated by dividing the total transaction value by the number of transactions, indicating reduced network activity.

The decline in market activity has also impacted the average holding period for Arbitrum (CRYPTO: ARB), which now stands at 5.4 months.

This suggests that most ARB holders are short-term traders frequently exchanging tokens, reducing the long-term demand for the asset.

Technical analysis: Supply zone and liquidity cluster

On the daily chart, Arbitrum (CRYPTO: ARB) has entered a supply zone, signaling a bearish outlook for the asset.

A supply zone on the price chart indicates a price region that encounters significant selling pressure, often driving the asset's value lower.

Currently, ARB is in a supply phase and is projected to decline further, potentially dropping to $0.85, where a liquidity cluster is evident on the chart.

For the token to reverse its trajectory and bounce higher, the market sentiment around the asset would need to shift positively.