Arbitrum (ARB) is showing signs of weakness as Ethereum (ETH) battles to reclaim the critical $4,500 resistance. While ARB has benefitted from ETH’s strong rally over the past month, the recent slowdown in Ethereum’s price momentum could spell trouble for the layer-2 token.
Arbitrum’s Reliance on Ethereum’s Trajectory
At press time, Arbitrum is trading at $0.49, holding on to a 30% gain recorded over the past 30 days. This rally coincided with Ethereum’s surge to new highs. Data reveals a strong correlation between the two: over the last 90 days, ETH jumped 174%, while ARB climbed 82%.
Such tight price correlation suggests that any weakness in Ethereum’s trajectory almost immediately translates into headwinds for Arbitrum. As ETH now struggles to push past the psychological $4,500 barrier, ARB’s upside appears capped, leaving the token exposed to potential sell-offs.
Open Interest Plunge Signals Fading Confidence
Beyond ETH’s price action, another factor casting doubt on ARB’s momentum is Open Interest (OI) in the derivatives market.
Just two weeks ago, OI for Arbitrum was on course to hit $500 million, reflecting heightened trader activity and strong speculative demand. However, that figure has since collapsed to just $206 million, signalling capital flight from ARB’s futures and options markets.
Lower OI typically reflects reduced participation from leveraged traders, draining the market of liquidity and momentum. This decline suggests that the enthusiasm which supported ARB’s rally is waning. Unless OI stabilises and recovers, the token could face further consolidation or even steep losses.
Technical Indicators Turn Bearish
The technical setup for ARB offers little relief. On the daily chart, the Moving Average Convergence Divergence (MACD) has slipped into negative territory, signalling weakening momentum.
Adding to this, the 12-day Exponential Moving Average (EMA) has crossed below the 26-day EMA, forming a bearish crossover. Such crossovers are widely seen as precursors to extended downside moves.
If this pattern persists, ARB’s price could test the $0.45 support zone. A deeper correction could see it falling to $0.39, aligning with the 0.382 Fibonacci retracement level. In a worst-case bearish scenario, the token risks dipping further to $0.33.
Upside Scenario Hinges on Ethereum Recovery
Despite the bearish outlook, not all hope is lost for Arbitrum bulls. If Ethereum can decisively reclaim the $4,500 mark, the momentum could spill over into layer-2 tokens, including ARB. Such a development could trigger renewed demand and lift ARB toward $0.62.
Additionally, a stabilisation in derivatives activity would help restore confidence, potentially attracting fresh liquidity into the market. For now, however, the prevailing sentiment remains cautious as traders watch ETH’s performance closely.
Short-Term Pressure, Long-Term Potential
Arbitrum’s immediate future appears tied to Ethereum’s ability to break through resistance and sustain its uptrend. With declining open interest and bearish technical signals, ARB faces significant downside risks in the short term.
Yet, as one of the leading layer-2 scaling solutions for Ethereum, its long-term potential remains intact. Should Ethereum regain momentum and broader market sentiment turn risk-on, ARB could quickly rebound.
For now, traders may need to brace for volatility as the token tests key support levels, with the $0.45 zone emerging as a critical battleground between bulls and bears.
