Arbitrum plans to buy back ARB tokens to combat price drop
Arbitrum announces ARB token buyback amid 85% price decline.
Arbitrum is set to execute a strategic buyback of ARB tokens as the asset remains down over 85% from its all-time high.
The move comes amid a prolonged price decline and ahead of a token unlock event, as Offchain Labs, Arbitrum’s backing company, seeks to reinforce its commitment to the ecosystem, reports BeInCrypto.
Key Takeaways
- Strategic Buyback: Offchain Labs announced a plan to repurchase ARB tokens, aiming to add them to its treasury under predetermined parameters for sustainability.
- Token Unlock Impact: A token unlock event will release 92.65 million ARB tokens, representing 2.1% of circulating supply and potentially causing a supply shock.
- Market Sentiment: Despite a temporary price boost, critics argue that buybacks alone may not drive long-term growth, calling for a diversified reinvestment strategy.
Buyback Plan and Ecosystem Commitment
In a post on X, Offchain Labs confirmed its strategic buyback plan, stating, “We’re reinforcing our commitment to the ecosystem and strengthening our alignment by adding ARB to our treasury through a strategic purchase plan.”
ARB price chart. Source: coinmarketcap.com
The buyback initiative is designed to absorb some of the supply shock expected from the upcoming unlock of 92.65 million ARB tokens valued at approximately $30.75 million at current rates. This strategic move is intended to bolster market confidence by countering the effects of heavy selling pressure that has weighed down ARB’s price.
Criticism and Broader Market Implications
However, not everyone is convinced. Prominent wallet maxi Yogi criticized the buyback strategy as “unimaginative and short-sighted,” suggesting that a more diversified approach is needed. Yogi proposed allocating funds not only to buybacks but also to liquidity provision, yield-generating treasuries, ecosystem investments, and a protocol insurance fund. Patryk, a researcher at Messari Crypto, echoed the sentiment by advising that flexibility is crucial, as rigid frameworks at the outset of buybacks can be problematic.
As ARB faces renewed market scrutiny following its recent listing on Robinhood and heightened community support for the BoLD proposal, all eyes will be on whether this buyback strategy can reverse the current bearish trend and restore long-term momentum.
Recently we wrote, that Tether has chosen Arbitrum, a leading Layer 2 scaling solution on Ethereum, as the infrastructure for its latest cross-chain initiative, Legacy Mesh.
