|
|
Price Dynamics of Automated Market Makers: Simulation-based Approach
Kubal, Jan ; Krištoufek, Ladislav (advisor) ; Čech, František (referee)
The aim of this thesis is to analyze the price dynamics implied by the Automated Market Makers used by Decentralized Exchanges of DeFi and to verify the presence of some behavioral patterns with a simulation-based approach. Returns from 10 representa- tive token pairs were collected over a 15-day period and their properties were compared against traditional stylized facts. A simulation that reproduces the observed price pro- cess was then developed, mimicking the realized swap orders and utilizing the constant product pricing equation of AMMs, incorporating two additional features that implement periods of hype and herding behavior. Analysis of the empirical data revealed that AMM token returns follow the stylized facts most of the time, with their distributional properties, autocorrelation patterns, and volatility clustering. No consistent trend in the leverage effect was found among tokens. The simulation then confirmed that a basic AMM model is sufficient in producing prices with similar returns, showing that this method of transaction settlement is robust and generates the expected price dynamics. The two behavioral mechanics added further increased the similarity between real and simulated return characteristics, indicating that the effects may also influence the actual price formation process. 1
|
|
|
Exploring the relationship between Bitcoin price and the network's hashrate
Kubal, Jan ; Krištoufek, Ladislav (advisor) ; Šíla, Jan (referee)
The goal of the thesis is to identify factors that drive the price of Bitcoin and the hashrate of the Bitcoin network, which represents the total computing power dedicated to Bitcoin mining, and to explore the relationship between these two variables. In the Bitcoin system, four variables were assumed to be endogenous, thus for each of them, an equation was constructed. This was the case of the Bitcoin price, the hashrate of the Bitcoin network, the total transaction fees paid, and the search volume for the term "bitcoin". The system of four equations was then simultaneously estimated, utilizing the method of Two-stage least squares. Results revealed several statistically significant explanatory variables of the price and the hashrate, including the money supply of the United States dollar or the number of unique active addresses on the Bitcoin network. The hashrate was shown to drive the price positively, however, the estimated effect of the price on the hashrate was statistically insignificant. It was argued that it might have been caused by exogenous shocks affecting multiple variables, that could not be accounted for in the data. In addition, the factors affecting the hashrate were assessed from the environmental point of view, as the high environmental impact is one of the main points in the criticism...
|
guest ::
