AXS token gains 40% after taking steps to avoid “permanent economic meltdown.”
The price of the AXS token has increased by almost 40% in 3 days. AXS surged to more than $65, its highest level in more than two weeks, as Axie Infinity unveiled an improved reward structure for its player-versus-player (PVP) round.
Notably, this play-to-earn startup increased the number of leaderboard positions to 300,000 and increased the number of AXS rewards for next season to 117,676 from the previous 3,000.
“This will boost the competitive landscape in Axie and create greater demand for quality Axie teams in the ecosystem,” explains Axie Infinity, adding that they will be creating a $6 million prize pool for Season 20.
Daily AXS/USD chart | Source: TradingView
Economic reforms increase demand for AXS
AXS serves as the governance token for the Axie Infinity protocol. Additionally, it serves as legitimate money to purchase in-game NFTs – more or less unique digital pets known as “Axies” – on the Axie Marketplace. Finally, players also use AXS to breed new axes from existing axes.
But Axie Infinity uses a dual token structure. Players will also earn another cryptocurrency, Smooth Love Potions (SLP), for completing daily quests and passing levels in Adventure Mode. In addition, they receive SLP rewards from the territory battles in the game Axie Infinity.
Axie Infinity is also removing daily quests and adventure modes, meaning players will now only earn SLP tokens through territory battles. This decision is expected to reduce the daily supply of SLP tokens by 56%.
SLP is important because players burn it so old axes can breed new axes. So far, the Axie Infinity team has created more SLPs to reward players than burn through breeding. Unfortunately, this has led to higher SLP inflation, causing the token price to fall from a summer 2021 high of $0.4 to $0.008 on February 3rd.
height SLP cast (green) and fired (red) | Source: Axie Infinity
As a result, Axie Infinity has eliminated the paths that generate more SLPs. The team notes that while the daily quest basically encourages people to play every day, it also increases the strain of the 45 million SLP supply being pushed into the Axie Infinity economy.
“The axie economy requires decisive and decisive action now, or we risk total and permanent economic collapse.”
Simply put, the Season 20 update will make SLPs scarcer, potentially making Axies more valuable. In the “perfect” scenario, Axie Infinity could attract more players and crypto advocates, theoretically increasing demand for its AXS token.
That partly explains why AXS’ price surged more than 40% following the Feb. 3 announcement of Axie Infinity.
The recent buying phase in the AXS market helped the price regain a key short-term resistance level as support.
Notably, on Sunday the price broke above the 200 4-hour exponential moving average (EMA 200-4H, blue wave in the chart below). Recent retesting of this level has also boosted selling sentiment. Hence, calling it as support increased AXS’s potential to extend the bullish momentum.
AXS/USD 4 hour chart | Source: TradingView
The $68 level would be the next upside target, according to a Fibonacci retracement chart drawn from a $140 swing high to a $45 swing low. Meanwhile, a decisive move above $68 could pave the way for AXS to target $80 next.
Conversely, a pullback from $68 can see the price test the 20-4H EMA (green wave) near $56 as the next downside target.
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