This Little-Known Altcoin Powering Robinhood’s New Blockchain Just Soared By 45%. Is ARB a Buy, Sell, or Hold?
Arbitrum (ARB +48.08%) gained 45% in the last week, marking the most exciting stretch for the coin in at least the last couple of years. The impulse for the move was Robinhood Markets (HOOD -2.09%) launching its own blockchain on July 1, running on Arbitrum’s technology. Activity on Robinhood’s chain thus kicks Arbitrum some fees.
If past bouts of speculative activity in the crypto market are anything to go by, the new chain’s heyday won’t last forever. Its faucet of fees might taper off eventually, leaving Arbitrum with little else to rely on for growth. So does all of this make Arbitrum a buy, a sell, or a hold?
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Robinhood’s chain brings in more in a day than Arbitrum does in a month
Robinhood Chain took in $4.3 million of revenue, meaning that the fees it kept after paying the cost of posting its data to Ethereum, on Sept. 3, were the most of any network tracked on the crypto data aggregator DefiLlama. Arbitrum’s own network collected $365,060 in fees, which is the gross amount users paid to transact on it, during all of August. That’s less than the $1.6 million in fees it brought in for that same period a year ago.
With the Arbitrum Expansion Program, chains built on its technology that settle their transactions elsewhere — such as the Ethereum mainnet, as Robinhood’s network does — must pay 10% of their net chain profit back to Arbitrum. Eight percent of the profits are sent to the Arbitrum decentralized autonomous organization (DAO) dedicated to the network’s governance, and the remaining 2% are sent to a developer “guild” that works on developing new features.
That means activity on Robinhood’s ledger results in value accruing to the coffers of those two entities, both of which could credibly devise new policies and new tech that would increase the value of Arbitrum’s token.
Today’s Change
(48.08%) $0.06
Current Price
$0.20
Key Data Points
Market Cap
Day’s Range
$0.13 – $0.19
52wk Range
$0.07 – $0.56
Volume
691M
The catch is that holders of Arbitrum’s token don’t actually have any direct exposure to upside.
There’s no mechanism like a buyback to constrain the token’s supply over time, pushing up the value of the remaining tokens in circulation. Nor does it pay dividends or grant holders any rights, save for the right to vote on proposals advanced by the governance group.
So is Arbitrum a buy, sell, or hold?
This is one of the few cases where I am in favor of buying the coin, despite its lack of holder-friendly policies that link returns to network (or, in this case, technology) utilization.
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%
In short, Arbitrum is now connected to a cash spigot coming from Robinhood’s chain.
Robinhood is an independent business with a strong incentive to continue building out its crypto network to boost its stock price. Arbitrum doesn’t need to do anything to continue reaping the benefits of having licensed its technology, though it will now have more capital with which to further develop that technology.
That means Arbitrum, which until recently was just a faded also-ran altcoin, could now become formidable. It’s worth buying a small allocation of this coin, preferably once the immediate hype has ebbed a bit.
