Arbitrum’s Airdrop Is Just Around the Corner—How Much Will ARB Be Worth?

There’s a new layer-2 token in town.

Arbitrum recently announced the launch and airdrop of its native governance token called ARB. The token has yet to be distributed, with the developer team indicating ARB will hit eligible wallets on March 23.

That’s left plenty of time for armchair token valuations as the Crypto Twitterati mulls how much those new tokens could be worth.

According to some analysts, Optimism’s OP token is a good starting place for estimating ARB token valuations. The layer-2 networks have a similar technology stack that uses optimistic rollups. The Optimism team announced its token launch back in April 2022.

My back of the envelope calcs using Defillama data:
— if equal Mcap -> $0.68
— if equal FDV -> $1.02
— if equal MCap adjusted for TVL -> $1.05
— if equal FDV adjusted for TVL -> $1.58

— silto (@_silto_) March 16, 2023

Estimating the price of ARB

CoinGecko data shows that Optimism’s market capitalization is roughly $839 million, with each token priced at $2.63. OP’s circulating supply is 314.8 million.

Following the airdrop on Thursday, ARB’s circulating supply will be approximately 1.275 billion. The total supply is 10 billion tokens, with 12.75% hitting the market this week.

A token’s circulating supply refers to how many tokens are trading on the market. It differs from a token’s total supply which is the total number of tokens in existence, including locked allocations. Its market cap is calculated by multiplying a token’s price with its circulating supply.

Optimism Pumps 16% Amid Coinbase Layer-2 Launch

If the ARB token hits the same valuation as OP, the price of ARB would be $0.65 after dividing OP’s current market cap (~$839 million) by the number of ARB tokens that will be distributed (1.275 billion).

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

The FDV, or the estimated market cap based on the total token supply, of OP tokens is $11.45 billion given 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 the tokens which will be unlocked at a future date, the FDV is a more future-looking assumption than the circulation market capitalization.

Should the ARB token trade at a similar FDV as Optimism, rather than the circulating market cap, the price of the ARB token will be around $1.15. This figure is estimated by dividing OP’s FDV ($11.45 billion) by the total supply of ARB tokens (10 billion).

DeFi goes layer-2

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

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

Arbiturm currently enjoys the fourth-largest TVL per data from DefiLlama, boasting roughly $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 is $982.4 million.

The total DeFi TVL of various networks. Source: DeFi Llama.

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

The ratio for these two projects in particular is 1.8. Analysts then multiply this figure by the above estimates for the token’s price based on its market cap and FDV.

This gives another, more DeFi-centric estimate of $1.16, based on the market cap, and $2.07, based on FDV.

What’s next for ARB?

According to the above estimations, the token could thus trade anywhere between $0.64 and $2.07.

The majority of early Arbitrum users have been allocated 625 ARB tokens, corresponding to an approximate total airdrop value of between $400 and $1,250.

Here’s which addresses are getting ARB tokens and how many. Source: Dune.

The highest allocation per address is 10,250 ARB tokens, where roughly 4,400 wallets could receive anywhere between $6,500 and $20,600 in tokens.

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

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