Price Formation and Price Symmetry Analysis: the Case of Smooth Love Potion (SLP) Cryptocurrency

Date

1-2023

Degree

Bachelor of Science in Economics

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Luisito C. Abueg

Co-adviser

Yolanda T. Garcia

Committee Member

Ma. Luisa G. Valera Yolanda T. Garcia Luisito C. Abueg Gideon P. Carnaje Agham C. Cuevas

Abstract

This study attempts to determine the price formation and price symmetry of the Smooth Love Potion (SLP) cryptocurrency. SLP can be earned by playing the Axie Infinity game which was released in 2018 and is one of the first play-to-earn games released. The earned SLPs can then be traded in coin exchange platforms for money, like any other cryptocurrencies. In 2021, the Philippines was considered as the country with the most number of players comprising 40% of the total players of the game which reached up until 2 million players at that time. The quantity theory of money was used for establishing the price formation model of SLP. The predictor variables included are the SLP velocity, stock, and transaction volume and the outcome variable is the SLP price. Overall results showed that the actual relationships of the velocity and transaction volume to the SLP price are opposite to that of the hypothesized relationships which are based on the propositions of the quantity theory and that the SLP stock is non-significant. The price symmetry model by Houck (1977) was used for the second analysis and the results showed that the SLP price exhibit a positive asymmetric behavior. A sensitivity analysis was also conducted in order to test the integrity of the results of the overall study. The price series was divided into two price windows through the identification of the structural break using the Dummy Variable approach. Results of price formation analysis in the first price window showed the same results like the overall study. The second price window introduced two new variables representing the SLP's attraction to investors. Results showed that the velocity and negative attractions exhibit the opposite relationship with the SLP price and the rest follow the hypothesized relationship. For the price symmetry analysis, both price windows exhibit a positive asymmetric behavior.

Language

English

LC Subject

Price formation, Price symmetry, Smooth love potion (SLP)

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993.5 2023 E2 E87

Document Type

Thesis

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