Arbitrum (ARB) and the AI Credit Revolution: How On-Chain Innovation and Institutional Partnerships Could Drive a 90%+ Rally

The cryptocurrency market is no stranger to volatility, but for Arbitrum (ARB), the next 12–18 months could mark a turning point. With a confluence of institutional partnerships, AI-driven financial tools, and strategic on-chain utilities, ARB is positioning itself as a cornerstone of the DeFi-to-traditional finance bridge. This article argues that despite short-term competition and market noise, Arbitrum's ecosystem developments—particularly its alignment with Euler Labs' AI credit product—could catalyze a 90%+ rally in its native token.

Institutional Partnerships: PayPal and Robinhood Fuel ARB's Utility

Arbitrum's integration with PayPal's PayPal USD (PYUSD) stablecoin in July 2025 marked a watershed moment. By supporting PYUSD on its chain, Arbitrum expanded its utility into mainstream financial services, attracting a new wave of institutional capital. The move triggered a 10% price surge and a 6% hourly rally in late August 2025, pushing ARB closer to a 90% recovery from its 2024 peak.

Meanwhile, speculation about a potential partnership with Robinhood Markets in May 2025 sent ARB surging 17% as rumors swirled about Arbitrum powering a European trading initiative. While no official announcement materialized, the alignment of Robinhood's global ambitions with Arbitrum's Ethereum-compatible scalability underscores a strategic fit. Traditional finance platforms are increasingly adopting layer-2 solutions to reduce costs and enhance user experience, and Arbitrum's low fees and high throughput make it a prime candidate.

Euler Labs' AI Credit Product: Bridging DeFi and Real-World Spending

Euler Labs' Swype credit card, launched in August 2025, represents a seismic shift in DeFi's utility. By enabling users to spend crypto collateral (from Euler or Aave) without liquidation, Swype bridges the gap between decentralized finance and everyday transactions. The card, built on Base but with plans to expand to Arbitrum, Solana, and Avalanche, allows users to borrow USDC in real-time for purchases, supported by Apple Pay and Google Pay integrations.

What makes this product transformative? AI-driven risk modeling. Euler's partnership with CDAR AI in August 2025 injects real-time analytics into its lending markets, optimizing collateral requirements and interest rates. This AI layer not only enhances security but also attracts institutional-grade capital by reducing default risks. For Arbitrum, which already hosts 46% utilization in Aave's lending markets, Euler's AI credit product could further diversify its TVL and attract liquidity from both retail and institutional players.

On-Chain Utilities: Timeboost, Security Audits, and Cross-Chain Expansion

Arbitrum's technical upgrades are equally compelling. The Timeboost initiative, launched in 2025, reduces transaction latency and enhances scalability, addressing a key pain point for DeFi users. Additionally, the $14 million Arbitrum Audit Program—funded by ARB tokens—subsidizes smart contract audits for projects on the chain, fostering a secure environment for innovation. This initiative, administered by a committee including the Arbitrum Foundation and Offchain Labs, signals a long-term commitment to ecosystem health.

Euler's expansion to Linea (an Ethereum-aligned L2) in August 2025 further highlights the chain's appeal for institutional-grade strategies. By launching isolated ETH markets for WETH, wstETH, and ezETH, Euler taps into Arbitrum's existing liquidity pools while leveraging Gauntlet-managed risk parameters. This cross-chain interoperability positions Arbitrum as a hub for DeFi innovation, even as competition from Optimism and Solana intensifies.

Why a 90%+ Rally Is Plausible

Despite short-term volatility—ARB traded at $0.51 in August 2025, 79% below its 2024 peak—the fundamentals are undervalued. Here's why:
1. Institutional Adoption: PayPal and potential Robinhood integrations inject real-world utility, driving demand for ARB as a settlement layer.
2. AI-Driven Lending: Euler's AI credit product, if expanded to Arbitrum, could attract $100M+ in TVL by 2026, boosting the chain's dominance in lending and derivatives.
3. Security and Scalability: Timeboost and the audit program reduce friction for developers, ensuring Arbitrum remains a top L2 for Ethereum-based DeFi.
4. Cross-Chain Synergy: Euler's roadmap includes global Swype expansion to Solana and Avalanche, but Arbitrum's Ethereum alignment gives it a first-mover advantage in institutional adoption.

Investment Thesis: Buy and Hold for the Long Game

For investors, the key is to focus on structural tailwinds rather than short-term price swings. Arbitrum's ecosystem is building a flywheel: institutional partnerships drive TVL growth, AI tools enhance capital efficiency, and security upgrades attract developers. While Solana and Optimism pose competition, Arbitrum's Ethereum alignment and strategic partnerships give it a unique edge.

Recommendation: Accumulate ARB at current levels, with a target of $1.10 (90% above $0.51) by Q4 2026. Use stop-loss orders to mitigate volatility but remain bullish on the chain's ability to capture a larger share of the DeFi lending and AI-driven finance markets.

In the next 12–18 months, Arbitrum could emerge not just as a Layer 2 solution but as a foundational infrastructure for the next phase of DeFi—where AI, institutional capital, and real-world utility converge. For those willing to ride the volatility, the rewards could be substantial.