Arbitrum, layer-2 blockchain launches its token. What could it be worth?

A new layer-2 token is arriving on the crypto market. Arbitrum recently announced the launch and distribution of its native token called ARB. The token is yet to be distributed, and the development team indicated that ARB will be airdropped to eligible wallets on March 23. This has left enough time for crypto Twitter to estimate how much the new tokens could be worth.

According to some analysts, Optimism’s OP token is a good starting point for estimating the valuation of the ARB token. The layer-2 blockchain has a similar tech stack that utilizes optimistic rollups technology. The Optimism team announced the launch of the token back in April 2022.

Price estimation for ARB

Data from CoinGecko shows that Optimism’s market capitalization is approximately $839 million, with each token priced at $2.63. The circulating supply of OP is 314.8 million tokens.

After the airdrop on Thursday, the circulating supply of ARB will be approximately 1.275 billion. The total supply is 10 billion tokens, meaning that 12.75 percent of the tokens will enter the market this Thursday.

The circulating supply of a token refers to how many tokens are trading in the market. It differs from the total supply of the token, which is the total number of tokens that exist, including locked allocations. Market capitalization is calculated by multiplying the token price by the circulating supply.

If the ARB token reaches the same valuation as OP, the price of ARB would be $0.65 after dividing the current market capitalization of OP ($839 million) by the number of ARB tokens to be distributed (1.275 billion).

After estimates using the circulating supply, analysts are also turning to the fully diluted valuation of the project (FDV).

FDV, or fully diluted valuation based on the total supply of tokens, for the OP token is $11.45 billion considering that the total supply is 4.29 billion tokens.

The FDV of a token is calculated by multiplying its market price by the total supply. Since it takes into account tokens that will be unlocked at a future date, FDV is an assumption that looks more towards the future.

If the ARB token trades at a similar FDV as Optimism, rather than the circulating market capitalization, the price of the ARB token would be around $1.15. This figure is estimated by dividing the FDV of OP ($11.45 billion) by the total supply of ARB tokens (10 billion).

DeFi on layer-2 blockchain

Given that Arbitrum is likely to play an important role in the world of decentralized finance (DeFi), turning to the total value locked in the ecosystem (TVL) can provide additional assistance.

TVL represents the total deposits in the network’s DeFi protocols and serves as an indicator of the ecosystem’s liquidity.

Arbitrum currently enjoys the fourth largest TVL according to DefiLlama, boasting approximately $1.77 billion. Ethereum leads the market with $29.1 billion, followed by Tron and BSC, each with a TVL of $5.3 billion and $4.79 billion, respectively. Optimism’s TVL stands at $982.4 million.

This can provide another metric by which analysts can measure the token’s valuation known as the TVL ratio. It is calculated by dividing the TVL between two relevant projects, such as Arbitrum and Optimism, to measure the relative strength of liquidity in both ecosystems.

The ratio for these two projects is specifically 1.8. Analysts then multiply this figure by the aforementioned price estimates based on its market capitalization and FDV.

This gives another estimate of $1.16 based on market capitalization and $2.07 based on FDV.

What’s next for ARB?

According to the estimates provided, the token could trade between $0.64 and $2.07. Most early users of Arbitrum have been allocated 625 ARB tokens, which corresponds to an approximate total value of the airdrop between $400 and $1,250.

The largest allocation per address is 10,250 ARB tokens, where approximately 4,400 wallets could receive tokens worth between $6,500 and $20,600.