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Axie Infinity token AXS gains 40% after taking steps to avoid ‘permanent economic collapse’

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In just three days, the price of the Axie Infinity (AXS) token has increased by approximately 40%. As Axie Infinity presented a redesigned incentive system for its player-vs-player (PVP) tournament round, AXS rallied to over $65, its highest level in over two weeks.

For the upcoming season, the play-to-earn startup increased the number of leaderboard spaces to 300,000 and increased the quantity of AXS incentives to 117,676 from the previous 3,000.

“This will accelerate the competitive Axie scene and increase demand for quality Axie teams in the ecosystem,” Axie Infinity said, adding that their decision will result in a $6 million prize pool for Season 20.

AXS/USD daily price chart. Source: TradingView

AXS demand rises as the economy improves

The Axie Infinity protocol uses AXS as a governance token. It also serves as legal cash for the purchase of nonfungible tokens (NFTs) — more or less one-of-a-kind digital pets known as “Axies” — via the Axie marketplace. Finally, gamers can use AXS to breed new Axies from the ones they already have.

Axie Infinity, on the other hand, employs a dual-token format. Smooth Love Potions (SLP), the other cryptocurrency, was given to players who completed daily objectives and cleared levels in the adventure mode. In the Axie Infinity game, players could also earn SLP by fighting in different areas.

Axie Infinity also removed the daily quest and adventure mode, leaving gamers with just area combat to gain SLP tokens. The action is expected to lower the daily supply of SLP tokens by 56%.

This is crucial since players must burn SLPs in order for old Axies to hatch new ones. The Axie Infinity crew has recently developed more SLP to award gamers than they have burnt through breeding. Unfortunately, this resulted in increased SLP inflation, causing the per token rate to plummet from $0.40 in summer 2021 to $0.008 on February 3.

SLP mints and burns. Source: Axie Infinity

Axie Infinity cut off sources of SLPs

As a result, Axie Infinity cut off sources of SLPs. The daily quest encouraged individuals to play every day in theory, but it also put a 45 million SLP supply strain on the Axie Infinity economy, according to the team. The following was stated:

“We must take immediate and decisive action to save the Axie economy, or we will face utter and lasting economic collapse.”

Simply said, the Season 20 update would reduce the availability of SLP, potentially increasing the value of Axies. As a result, in the “ideal” scenario, Axie Infinity would acquire popularity among gamers and crypto enthusiasts alike, perhaps increasing demand for its AXS coin.

That explains why the AXS price increased by more than 40% following Axie Infinity’s statement on February 3.

Technical of the AXS pricing

The AXS market’s price has reclaimed a significant short-term resistance level as support following the most recent round of purchasing.

On Sunday, AXS price above its 200-4H exponential moving average (200-4H EMA; blue wave in the chart below). Retests of the same level have recently occurred in tandem with a rise in selling sentiment. As a result, recovering it as support increased AXS’s chances of continuing its uptrend.

AXS/USD four-hour (4H) price chart. Source: TradingView

According to the Fibonacci retracement graph constructed from AXS’s swing high near $140 to its swing low around $45. The next upside target is $68. Meanwhile, AXS might aim for $80 if it makes a decisive move over the mentioned level.

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