Descriptives

RUNE price overtime

RUNE is "the asset which powers the THORChain ecosystem and provides the economic incentives required to secure the network" (https://docs.thorchain.org/rune). The price of RUNE since it was introduced in April 2021 has ranged from 3.519 to 20.952. At the time of writing this post, the price of one RUNE equals $3.821.

The graph below shows the daily price of RUNE from April 2021. As can be seen, the RUNE price has remained unchanged between July 17th and September 17th, 2021. The reason is that due to a hacking attack the network was halted for this period.

Swap volume over time

On THORChain, users can swap their digital assets for other digital assets. However, the means of swapping on Thorchain is different from conventional swaps by using liquidity pools. When a user swaps one asset (ّFrom) for another asset (To) on THORChain, first, the 'From' asset will be swapped for RUNE in the corresponding pool, then, the RUNE will be swapped for the 'To' asset in another corresponding pool.

The daily volume of swapping on Thorchain can be measured by the total amount of assets ($) that are swapped, the number of swapping regardless of the amount in a day or the number of unique swapper.

The graphs below show how swap volume on the basis of the following variables have changed over time:

• Dollar $,
• swapping frequency, and
• unique swappers volume

RUNE price and swap volume relationship

Examining relationship between RUNE price and swap volume is not straight forward. Firstly, as I discussed above, we should clarify our definition on 'the volume of swap' and what our definition indicates. Secondly, we should be careful in calculating swap volume through daily swap reports. On Thorchain, one can basically swap an asset for another asset which is executed through two swaps (asset A --> RUNE and RUNE to asset B). However, it is possible to swap an asset for RUNE or swap RUNE for an asset. This implies that our swapping volume consists of swaps and RUNE trades. The latter can be influenced by RUNE price (in other words by demand and supply of RUNE). Therefore, to understand direct effect of the price on swapping (not trading RUNE) om THORchain, we should make distinction between RUNE trading and swapping. Thirdly, we should be aware of the effect of rune price on the exchange rate of two swapped assets. This implies that we cannot use RUNE volume to grasp the volume of swapping as RUNE price it self can influence our measuring of volume of swapping (our instrument).

It is important to see how these three variables interrelated. From the scatter plot below, we can expect a positive correlation between the daily volume of swaps in dollar, volume of unique swappers and volume of swaps. Yet, it is wise in our analysis we make distinction between these three.

		RUNE_PRICE$	SWAP_VOL_RUNE$	SWAP_COUNT	UNIQUE_SWAPPER	SWAP$_TRADE_EX.
RUNE_PRICE$	1				
SWAP$_VOL_RUNE$	-0,107860224	1			
SWAP_COUNT	-0,276612093	0,857349562	1		
UNIQUE_SWAPPER	-0,15724577	0,412639361	0,51158503	1	
SWAP$_TRADE_EX.	-0,088613564	0,983246729	0,841157162	0,409687058	1

Definitions and measurements

Here swap volume is defined and measured as:

1- The total amount of swaps in dollar (RUNE trading excluded)

2- The total number of swaps

3- The total number of unique swappers

** unfortunately data to exclude RUNE traders and number of RUNE swaps are not available.

The graphs below compares RUNE price with the three above measures of swapping volume. As can be seen from the graphs except some short periods the ups and downs did not happen hand in hand. This begs further investigation.

The scatter plot also show no clear relationship between price and volume.

The correlation table below shows the negative correlation between RUNE price and volume. This correlation does not seem to be significant but worth to consider it.

The reason behind this would be higher price of RUNE make swapping less attractive because of fee. However, the cause effect direction cannot be opposite. The more swapping on THORchain may increase the demand of RUNE, therefore, we should expect the higher price of RUNE.