Arbitrum (ARB +44.55%) surged by 45% over the past week, marking an exhilarating period for this cryptocurrency, the best it’s seen in a couple of years. This price hike is largely due to Robinhood Markets (HOOD -2.09%) unveiling its own blockchain on July 1, which is built on the Arbitrum technology. Consequently, increased transactions on Robinhood’s platform generate fees that benefit Arbitrum.
Historically, speculative surges in the cryptocurrency sector are often fleeting. Over time, the influx of fees may diminish, leaving Arbitrum’s growth prospects uncertain. This raises the question: Should investors categorize Arbitrum as a buy, sell, or hold?
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Robinhood Chain’s Revenue Exceeds Arbitrum’s Earnings
In a recent revenue report, Robinhood’s blockchain generated $4.3 million in fees on September 3, positioning it as the top earner among networks analyzed by the crypto data aggregator DefiLlama. In contrast, Arbitrum’s network amassed only $365,060 in fees for the entire month of August—marking a decline from the $1.6 million it achieved during the same period last year.
Under the Arbitrum Expansion Program, other chains utilizing its technology and settling transactions elsewhere, like Robinhood’s on the Ethereum mainnet, are required to remit 10% of their net profits back to Arbitrum. Of this amount, 8% is allocated to the Arbitrum decentralized autonomous organization (DAO), charged with governance, while the remaining 2% supports a developer “guild” focused on innovation.
This arrangement ensures that activities on Robinhood’s blockchain contribute positively to Arbitrum’s financial health, potentially leading to advancements in its technology and policies that could enhance the value of its token.
Today’s Change
(44.55%) $0.06
Current Price
$0.19
Key Data Points
Market Cap
Day’s Range
$0.13 – $0.20
52wk Range
$0.07 – $0.56
Volume
771.5M
However, it’s important to note that Arbitrum token holders have no direct access to potential gains.
The absence of a buyback mechanism over time means that there’s no scarcity driven by a reduction in available tokens, which could enhance the market value of existing tokens. Furthermore, token holders do not receive dividends or any rights beyond participating in governance votes.
Should Investors Consider Arbitrum a Buy, Sell, or Hold?
Despite the lack of shareholder-friendly strategies linking returns to the network’s (or technology’s) usage, I believe this is a rare instance where acquiring the coin is justified.
Today’s Change
(-2.09%) $-2.61
Current Price
$122.11
Key Data Points
Market Cap
Day’s Range
$119.82 – $124.70
52wk Range
$63.52 – $153.86
Volume
23.7M
Avg Vol
24.7M
Gross Margin
94.99%
Simply put, Arbitrum has established a connection to a lucrative revenue stream generated by Robinhood’s blockchain.
Robinhood, as a standalone entity, has a vested interest in expanding its crypto ecosystem to enhance its overall market valuation. Meanwhile, Arbitrum stands to benefit from the licensed use of its technology without direct intervention, potentially gaining additional funding for future enhancements.
Thus, what was recently seen as a lesser-known altcoin could soon emerge as a significant player. A small investment in this cryptocurrency may be worthwhile, especially after the current enthusiasm dwindles.