Thorchain - RUNE Price vs Swapping Volume
Zook
23/01/2022
In this article I will observe the correlation between swap volumes on Thorswap and the price of RUNE. The objective is to determine if a rise in swap volumes should be accompanied by an increase in the price of RUNE.
There are good reasons to believe that the price of RUNE should move in sync with swap volumes. All swaps on Thorswap either originate from RUNE (RUNE to token1) or are finalized in RUNE (token1 to RUNE). Swap fees are also paid in RUNE. Due to its utility, we should expect the demand (and price) for RUNE to increase along with swap volumes. Let’s see if this is the case.
Methodology
For this analysis I am only using data starting after September 20, 2021. This is because Thorchain went down for security reasons during the summer of 2021. Using data starting from the relaunch produces stronger correlations.
Since the price of Rune constantly fluctuates, I am using its daily average price (in USD).
Swap volumes represent the sum of all swaps on Thorswap in USD.
Data Visualization
Here is an overview of my dataset:
## avg_rune_price_usd daily_swap_count swap_volume_usd date
## 1: 3.887783 8283 31395043 2022-01-22
## 2: 4.707718 5884 21990784 2022-01-21
## 3: 5.327639 3135 12670692 2022-01-20
## 4: 5.456251 2118 7499230 2022-01-19
## 5: 5.547234 2251 9001623 2022-01-18
## 6: 5.742195 2772 12077898 2022-01-17
## 7: 6.022250 2097 11164184 2022-01-16
## 8: 5.985493 1388 5285249 2022-01-15
## 9: 5.897547 2238 9229853 2022-01-14
## 10: 6.055380 3777 17603517 2022-01-13
## 11: 5.839716 5196 30374417 2022-01-12
## 12: 5.598494 3434 14965284 2022-01-11
## 13: 5.698285 3765 15962595 2022-01-10
## 14: 5.777783 2507 13760820 2022-01-09
## 15: 5.904796 4562 24519305 2022-01-08
## 16: 5.911916 5056 16165789 2022-01-07
## 17: 6.298191 4598 19361785 2022-01-06
## 18: 7.120688 5180 22718273 2022-01-05
## 19: 6.803981 4111 16314627 2022-01-04
## 20: 6.589944 2784 16459247 2022-01-03
## 21: 6.574877 2280 8624546 2022-01-02
## 22: 6.209090 2150 9263635 2022-01-01
## 23: 6.161124 2518 7897214 2021-12-31
## 24: 6.132189 2109 7830628 2021-12-30
## 25: 6.507937 3552 12466987 2021-12-29
## 26: 6.904347 3861 16801143 2021-12-28
## 27: 6.631359 6523 32390809 2021-12-27
## 28: 6.476525 3409 16376245 2021-12-26
## 29: 6.604867 3086 13380804 2021-12-25
## 30: 6.664942 3143 9724424 2021-12-24
## 31: 6.236182 3814 13330919 2021-12-23
## 32: 6.172988 3901 16899633 2021-12-22
## 33: 5.713850 2752 12034234 2021-12-21
## 34: 5.407975 2664 6659811 2021-12-20
## 35: 5.604131 2004 9958309 2021-12-19
## 36: 5.708406 1784 4931615 2021-12-18
## 37: 5.772409 2653 7703014 2021-12-17
## 38: 5.986626 2590 10315225 2021-12-16
## 39: 5.726374 3137 10547141 2021-12-15
## 40: 5.738212 2756 10152048 2021-12-14
## 41: 6.153144 2997 11668979 2021-12-13
## 42: 6.417579 2000 6206591 2021-12-12
## 43: 6.309482 2384 9084211 2021-12-11
## 44: 6.395307 3882 18727698 2021-12-10
## 45: 6.847475 3587 15445844 2021-12-09
## 46: 6.848532 4419 19407507 2021-12-08
## 47: 6.958196 3741 14302519 2021-12-07
## 48: 6.771335 5618 27593775 2021-12-06
## 49: 7.462452 3602 19006324 2021-12-05
## 50: 7.632187 6987 36036759 2021-12-04
## 51: 9.185235 3787 18159601 2021-12-03
## 52: 9.347663 4506 21664578 2021-12-02
## 53: 9.443762 4120 24881309 2021-12-01
## 54: 9.275254 4876 28899405 2021-11-30
## 55: 9.798851 5114 27003584 2021-11-29
## 56: 9.655613 7661 22729088 2021-11-28
## 57: 9.973818 8177 25796859 2021-11-27
## 58: 10.266735 10100 37156057 2021-11-26
## 59: 10.220638 6756 25931254 2021-11-25
## 60: 9.724794 8063 24423257 2021-11-24
## 61: 9.576899 7471 23425780 2021-11-23
## 62: 9.812172 7099 18389557 2021-11-22
## 63: 10.466445 3266 17029406 2021-11-21
## 64: 10.573714 3380 20881804 2021-11-20
## 65: 10.034020 3306 21712462 2021-11-19
## 66: 11.139366 1223 9720131 2021-11-18
## 67: 12.069945 2490 10555646 2021-11-12
## 68: 12.227345 3992 17636903 2021-11-11
## 69: 12.327796 5968 38415369 2021-11-10
## 70: 12.683246 3907 24968813 2021-11-09
## 71: 13.109404 3748 29998192 2021-11-08
## 72: 13.399668 3661 21481115 2021-11-07
## 73: 13.106101 3351 21804241 2021-11-06
## 74: 13.442720 5492 44780459 2021-11-05
## 75: 14.191029 4652 25407901 2021-11-04
## 76: 15.660285 10037 60446571 2021-11-03
## 77: 15.762921 6162 34887497 2021-11-02
## 78: 15.061740 7669 38816640 2021-11-01
## 79: 13.188453 4988 30810646 2021-10-31
## 80: 13.673877 6135 27395971 2021-10-30
## 81: 12.748241 5059 19268459 2021-10-29
## 82: 11.922513 3927 14968046 2021-10-28
## 83: 11.750866 6477 30822761 2021-10-27
## 84: 12.373865 5524 32235350 2021-10-26
## 85: 12.291655 5897 36831660 2021-10-25
## 86: 10.651565 6350 48634948 2021-10-24
## 87: 10.301526 3825 18518073 2021-10-23
## 88: 9.887695 7580 41183624 2021-10-22
## 89: 8.385339 7945 38154000 2021-10-21
## 90: 7.595667 2474 7263130 2021-10-20
## 91: 7.524432 2815 8392145 2021-10-19
## 92: 7.650078 2471 6229375 2021-10-18
## 93: 7.855862 1910 4494199 2021-10-17
## 94: 8.078206 2614 7334716 2021-10-16
## 95: 7.815154 4566 14176753 2021-10-15
## 96: 7.526858 3242 9009138 2021-10-14
## 97: 7.214248 4261 11001296 2021-10-13
## 98: 7.136276 3097 10775200 2021-10-12
## 99: 7.646085 2561 7922610 2021-10-11
## 100: 7.911157 1813 4746584 2021-10-10
## avg_rune_price_usd daily_swap_count swap_volume_usd dateActivity on Thorchain vs Price of RUNE.
We will now use our data to measure the correlation between variables. Let’s use a scatter plot to visualize the daily total swap volumes (in USD) versus the daily average price of RUNE.
The correlation coefficient between the variables is 0.58. This represents a moderate correlation. The result is statistically significant with a p-value below 0.001.
This is an interesting result. The correlation is stronger than I expected.
Correlation with other variables
Let’s see the correlation of RUNE with other metrics.
The daily swap count ignores the USD value of swaps. It simply counts the number of swaps completed in a day. This engagement metric has a respectable 0.4 correlation with the price of RUNE. The result is statistically significant.
We can also plot the price of RUNE against the daily number of distinct addresses performing swaps. The difference with the previous result is that in this plot, users performing multiple swaps per day are only counted once.
There is a weak correlation (R=0.23) between daily distinct users and the price of RUNE.
Predictive Analysis
Our findings can be used to make predictions on the price of RUNE. A linear regression model can attempt to predict the price of RUNE based on swap volumes.
A linear regression is a straight line that ‘best fits’ the two variables.
##
## Call:
## lm(formula = swap_volume_usd ~ avg_rune_price_usd, data = thor.data)
##
## Coefficients:
## (Intercept) avg_rune_price_usd
## -3067024 2443076For every $2.44M increase in daily swap volumes, the price of RUNE is expected to rise by one dollar.
At time of writing, daily swap volumes on Thorchain are $31.3M and the price of rune is at a low point of $3.88. According to our regression model, what will be the expected price of Rune when daily swap volumes double to $62M ?
newdata = data.frame(swap_volume_usd=62000000)##
## Call:
## lm(formula = avg_rune_price_usd ~ swap_volume_usd, data = thor.data)
##
## Coefficients:
## (Intercept) swap_volume_usd
## 5.894e+00 1.398e-07## fit lwr upr
## 1 14.56252 12.92381 16.20123When swap volumes double what they are today, the price of RUNE should be $14.56 +- $1.64 (with a 95% confidence interval).
Conclusion
The correlation between swap volumes on Thorswap and the price of Rune is 0.58. Thus, we can expect the price of RUNE to increase as Thorswap becomes more widely used.
Thorchain may be looking at ways to increase the price of its native currency. When looking at which engagement metric to focus on, Thorchain should try to increase swap volumes.
When daily swap volumes reach $62M (double what they are today), the price of RUNE is expected to rise to $14.56 +- $1.64.
Thank you for reading.