After a highly publicized airdrop, ARB, the new token in the Arbitrum ecosystem exploded to $11.80 – the all-time high before dumping to trade at $1.21, which represents a 90% downswing from the record high.
This massive pullback is mainly attributed to an overwhelming selling pressure caused by the ‘buy the news narrative.” Investors positioned themselves for the March 23 airdrop but started dumping ARB tokens immediately.
In the last 24 hours, Arbitrum price lost another 5% although its trading volume is still above the 1 billion mark after increasing by 80%, in the same period.
The Arbitrum Foundation Races to Save First ARB Proposal
The ecosystem’s first governance proposal set off to a rocky start over the weekend, which sought to allocate 750 million ARB tokens, worth around $1 billion to the Arbitrum Foundation.
According to the communication from the foundation, those ARB tokens would be channeled into a “special grants” program focused on fostering growth on the layer 2 solutions protocol, Arbitrum.
According to AIP-1, Arbitrum Foundation would have complete discretion in allocating the nearly $1 billion sum, and ARB holders would not be able to participate in the decision-making process.
In other words, due to the centralized nature of the Arbitrum Foundation, the special grants program would be put through a “full on-chain governance” procedure, which allows token holders to provide direction to the ecosystem.
Arbitrum’s AIP-1 is a Ratification, The Foundation Clarifies
The Arbitrum Foundation was forced to come clear on some of the decisions it had made regarding the proposal and other issues without the community’s input.
In the clarification on the ratification of AIP-1, the foundation told members that before the decentralized autonomous organization took the reins, some decisions and actions were paramount to the success of the ecosystem—and that everything has been done in good faith and “with the sole goal of making sure that Arbitrum is positioned to succeed and compete with its peers.”
For example, Foundation was established to start and smoothen the decision-making process in order to avoid key “operational questions such as “who hosts the various governance forums where these discussions occur” as well as broader questions such as “who kicks off governance.””
The Foundation admits that it did not communicate its intentions clearly to the community and that the “proposal was intended to act as a ratification of the initial setup of both the Arbitrum DAO and the Foundation that has been created to serve the DAO.” Furthermore, the Foundation did not inform the community about key decisions that had been made earlier.
“The establishment of an initial distribution of tokens to the Foundation is a normal course of practice in setting up ecosystems like Arbitrum, and this was always the intent when AIP-1 was submitted for ratification concurrently with the announcement of the Arbitrum DAO,” the Foundation explained.
While standing firm with the decisions made in advance, the Arbitrum Foundation assured the community that ARB “is unique in that it is the only one among its peers in which the vast majority of the community tokens are currently controlled by the DAO on-chain.”
The Foundation insists it is the only foundation to have reached out to the community to help with the ratification process of the decisions that had been made before the DAO.
On the massive $1 billion grant in ARB tokens, which is expected to take place off-chain, the Foundation said that it was common practice to allocate “a significant token budge” and to avoid “voter fatigue,” which many might consider as effective way for smaller grants.
The $1 billion special grants proposal is essential for the success of the Arbitrum ecosystem.
Arbitrum Price Still Overwhelmed – Where to Next?
Arbitrum price is trading at $1.21 after bouncing off support at $1.1. The newly airdropped token was expected to stretch the leg to $1.4, where it would have activated a 25% double-bottom pattern breakout to $1.73, but it appears to have lost momentum.
For now, short-term support at $1.20 would matter most to the bulls and the bears alike. If this support is defended at all costs, Arbitrum price may gain momentum to $1.40 and $1.733 as buyers build confidence in its recovery.
However, a sustained break below the same support level would mean a spike in overhead pressure, with the possibility of ARB retesting the major $1.10 support area.
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