SOL and ARB are two of the most popular cryptocurrencies in the market, both aiming to provide scalable and low-cost solutions for decentralized applications. However, both coins have experienced a significant decline in their price and address activity in the past month, raising doubts about their future prospects.
SOL is the native token of Solana, a high-performance blockchain that claims to offer sub-second finality and over 50,000 transactions per second. SOL is used to pay for transactions, smart contracts, and storage on ` the network, as well as to participate in governance and staking. SOL reached an all-time high of $260 on 6 November 2021, but has since dropped to $18.34 as of July 1, 2023.
ARB is the native token of Arbitrum, a layer-2 scaling solution that leverages optimistic rollups to enable fast and cheap transactions on Ethereum. ARB is used to pay for fees, validators, and dispute resolution on the network and to bridge assets between Ethereum and Arbitrum. ARB reached an all-time high of $9.87 on June 1, 2023, but has since plummeted by 88.2% to $1.17 as of July 1, 2023.
Messari a crypto analytics firm, tweeted about declining address activity in Solana and Arbitrum, indicating reduced app utility:
.@Solana & @Arbitrum have experienced significant declines in address activity as app utility decreases. On Arbitrum, the largest declines are seen in #DeFi, meme coins, and general ERC-20 transfers, indicating saturation of financial opportunities relative to usage. pic.twitter.com/vnDVBnqIlS
— Messari (@MessariCrypto) July 1, 2023
The main reason behind the slump of SOL and ARB is the decrease in app utility and user activity on their respective platforms. According to Messari, Solana and Arbitrum have experienced significant declines in address activity as app utility decreases. On Arbitrum, the largest declines are seen in DeFi, meme coins, and general ERC-20 transfers, indicating saturation of financial opportunities relative to usage. On Solana, the decline is mainly driven by the drop in NFT and gaming activity and the competition from other blockchains.
Based on technical analysis, both SOL and ARB are currently trading below their major support levels, facing strong resistance from the bears. This may raise concerns about their chances of recovery. However, there are some positive signs indicating a potential reversal in the near future.
For SOL, one of the bullish factors is the launch of Wormhole 2.0, a cross-chain bridge that connects Solana with Ethereum, Binance Smart Chain, Terra, and Polygon. This could boost the interoperability and liquidity of Solana and attract more users and developers to its ecosystem. Another of the bullish factors for SOL in 2023 is the ultra-bullish strategy disclosed by Austin Federa, the head of strategy and communications at the Solana Foundation.
For ARB, one of the bullish factors is the growing adoption of Arbitrum by major DeFi protocols such as Uniswap, Aave, MakerDAO, Compound, and Curve. This could increase the usage and utility of Arbitrum and drive more value to its network. Another factor Arbitrum’s technology; Arbitrum is a layer-2 scaling solution that aims to improve Ethereum’s performance, reduce its fees, and enable more complex applications. It uses a technique called optimistic rollups, which allows transactions to be executed off-chain and verified on-chain later. This reduces the congestion and cost of using Ethereum, while maintaining its security and decentralization.
Based on these factors, SOL and ARB might recover from their slump in the long term, as they continue to innovate and deliver on their promises. However, they might face more volatility and uncertainty in the short term due to market sentiment and competition. Therefore, investors should be cautious and do their own research before investing in these coins.
