- Arbitrum’s DeFi TVL has been steadily increasing, recently reaching a one-month high of $2.45 billion.
- Despite a rise in TVL and open interest, bearish signals around ARB continue to dampen market sentiment.
Arbitration [ARB] is stuck in a bearish trend as the price has fallen 11% in the past month. However, the downtrend is showing signs of weakness as the ARB has risen from $0.49 to $0.56 in just four days.
ARB had lost some of these gains at the time of writing and was trading at $0.551. On-chain data shows that ARB is well positioned to stage a recovery and possibly regain its monthly highs.
Rising DeFi TVL could fuel the ARB rally
Arbitrum was recently reversed Base in terms of Total Value Locked (TVL) and is currently the second largest Layer 2 network by this metric.
Data from DeFiLlama shows that decentralized finance (DeFi) activity on the network is increasing again. At the time of writing, Arbitrum’s DeFi TVL stood at $2.456 billion, a single-month high.
Source: DeFiLlama
In addition to rising TVL, ARB volumes on centralized and decentralized exchanges have risen to their highest levels since August.
The rising TVL and spike in volumes indicate growing interest in the DeFi applications built on the Layer 2 network. This in turn could support ARB’s price recovery.
Arbitrum’s open interest is rising
There is also a flurry of speculative activity surrounding Arbitrum. This is reflected in the increase in open interest, which stood at $135 million at the time of writing.
In just three days, ARB’s OI has risen more than 10%, indicating derivatives traders are opening new positions on the token.
Source: Coinglass
A spike in OI accompanied by a price increase usually indicates bullish sentiment. Furthermore, Arbitrum’s funding rates have been mostly positive since September, reinforcing the bullish thesis.
Is ARB ready for a breakout?
Arbitrum’s four-hour chart shows that short-term momentum has turned bullish. The Chaikin Money Flow (CMF) indicator has a positive value of 0.07, indicating higher buying pressure than selling pressure.
The Awesome Oscillator also shows bulls taking control of ARB’s price action, with the AO bars turning positive.
However, the movement of these indicators also calls for caution. The CMF is tilting south, indicating that buying pressure is easing. Additionally, the red AO bar shows bears competing for control.
Source: Tradingview
If new buyers come in at current prices and Arbitrum breaks the resistance at $0.57, the next target will be the Fibonacci level of 1.618 ($0.62).
Realistic or not, here is ARB’s market cap in BTC terms
On the other hand, if ARB succumbs to the bearish trends and falls below the support at the 0.618 Fib level ($0.53), the price could fall to gather liquidity at $0.48.
The Arbitrum’s long/short ratio suggests traders are strongly leaning towards another decline. This ratio has fallen to 0.75, with 57% of traders opening short positions. This suggests that traders are less optimistic that the bullish signals around ARB will continue.
Source: Coinglass