Arbitrum, Optimism in 2024: Rising transactions, falling values—why?

In the ever-evolving crypto space, two Layer-2 Ethereum solutions to scale, Arbitrum (ARB) and Optimism (OP), have witnessed significant fluctuations in their transaction activities and fiscal performances thus far this year. However, despite a surge in transaction traffic within their ecosystems, both networks have observed a decline in their Total Value Locked (TVL) and the value of their native tokens.

Data from IntoTheBlock shows that Arbitrum and Optimism usage has quadrupled over the last twelve months. This growth was particularly notable in the second quarter after adopting the EIP 4844. The main objective of this proposal is to enhance Ethereum’s ability to handle larger volumes by implementing a more effective type of transaction, leading to reduced fees and improved processing capacity.

Arbitrum has seen growth, with the number of transactions climbing from less than 1 million to a record high of 2.6 million on June 26. At the same time, Optimism has shown an increase in the number of transactions, up to 800,000 in April and now at 409,000. Still, Arbitrum remains highly active, currently surpassing Optimism’s transaction count by over 1.5 million despite the latter’s fluctuations in performance.

However, the data presents a different picture when examining the overall sustainability of these platforms in terms of their financial health, as measured by the TVL, which represents the total amount of investment occurring within the platforms’ financial systems. Data from DeFiLlama shows that both Arbitrum and Optimism saw a surge in TVL earlier this year. 

Arbitrum’s TVL reached $3.1 billion in March, while Optimism’s reached $1 billion. During this period, individuals began to adopt these platforms and increase their investments. However, this trend is currently in flux, as Arbitrum and Optimism’s TVLs have decreased to $2.7 billion and $665 million, respectively.

However, several possible explanations exist for the observed decline in TVL and the decline in the value of both ARB and OP tokens. Such factors could include changes in investors’ attitudes toward cryptocurrencies or general market conditions that impact all cryptocurrencies. Furthermore, specific updates or changes in these Layer 2 networks can contribute to these trends.

The price trends for ARB and OP could have been more encouraging. The market analysis indicates a depreciation in the value of both tokens, with OP failing to rise beyond the $2.2 resistance level. It is currently trading at about $1.7. In the same way, ARB has placed its resistance level at approximately $1, currently at $0.07.

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The rising resistance is a clear sign of the growing negative sentiment, pointing to investors becoming more cautious about short-term price surges. Over time, these platforms for Ethereum Layer 2 are bound to evolve, and this brings about the challenge of providing for exponential growth in transactions while operating in the rather unpredictable terrain that defines the finance space in the current world of cryptocurrency.

Scott Cook

Scott Cook got into crypto world since 2010. He has worked as a news writer for three years in some of the foremost publications. He recently joined our team as a crypto news writer. He regularly contributes latest happenings of crypto industry. In addition to that, he is very good at technical analysis.

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