Arbitrum recently came up as one of the leading contenders within the layer-2 scalability solutions of the Ethereum network- where it boasted a significant TVL or Total Value Locked and other notable activity. However, between 9th September and 11th September, the price of the tokens of this scalability solution went through a steep decline of about 14.5% which made it the lowest point in history.
Quite a few investors are now looking for insight into the many factors that drove this movement and have also started questioning whether the scalability solution still has the competitive edge, considering that irrespective of the token performance of ARB, the TVL of the network still exceeds $1.6 billion.
Arbitrum Has Gone Through A Massive Drop
It should be noted that the previous week has been quite challenging for most of the cryptocurrencies around the world, but among the scaling solutions of Ethereum, none of them have faced a drop that exceeded 9% except for Arbitrum. One of the potential sources of concern also stems from the very absence of any instance of fraud-proof issuance- since the launch of the mainnet of this platform in August 2021.
Offchain Labs went on to confirm this to Cointelegraph on the 4th of September. Developers, interestingly, have also explained that this particular situation does align with the intended operation of the system, with validators who have malicious intentions losing out on the entire stake.
A few other factors that could have also been a catalyst in the recent price downturn have been associated with governance proposals from the decentralized autonomous organization of Arbitrum. The first proposal, which was posted on the 2nd of September, aimed at allocating around 75 million ARB tokens from the treasury of the project to address the community needs on a short-term basis.