Sunday, October 26, 2014

OMG WTF PLEX - An introspection on PLEX

PLEX recently crested 800M and as is customary, everyone is losing their collective minds over the perceived significance of crossing some round-number boundary.

Current articles as of publishing:

I am sure I'm missing a bunch, but there is a common thread: what is the maximum price PLEX could reach?

In the short term, we are seeing prices come down off their rally to 800M.  I don't expect this respite to be long, and unless CCP announces a PLEX sale for Phoebe or the holidays, I can see PLEX at 1B shortly after the start of the year.

Demand Side: The Price of Gold

PLEX behaves a lot like gold does in the IRL markets.  Though it has a variety of actual uses, its value is more a barometer of fears of inflation than its actual value.  People trading in PLEX are doing so because they fear that if they don't, the purchasing power of their ISK will drop because of inflation elsewhere.  

This becomes a self-fulfilling-prophecy, because the trend has (to date) been correct... but mostly only in the PLEX market.  
The speculation that PLEX is an indicator of rampant inflation is really just laughable.  If we compare the price of PLEX against any other day-to-day consumable (Like the CFC Isktar) we see that general ISK inflation is basically 0.  Especially using the Ishtar as base, we can draw that the value of static resources (moons) has stayed flat.  Also, watching mineral prices starting to turn around since Crius shows that the general purchasing power of ISK is staying rather healthy.

Supply Side: People are Cheap

We only see PLEX dip in price when there is a sale or other big event pushing supply.  Otherwise, the demand between people upkeeping accounts and traders hoarding PLEX far outstrips the supply of those cashing-in.

I think the behavior of the PLEX market says a lot more about what people are willing to pay to play EVE, rather than anything about the macro market.  When PLEX prices drop near the 3-month subscription numbers, people tend to buy a lot more... but when they are equal or greater than regular account fees, then people would rather not buy PLEX directly.

Though I do expect a substantive shock when the price of PLEX crosses the 1B mark.  Though I still expect the price to climb, we may see a wave of people unsubscribing.  I hesitate to speculate about CCP's plans for PLEX in the long term, they may be okay with never having to deliver on the outstanding credit PLEX represents.

Conclusions

There's a reason I've put PLEX at the front of my analysis on the Prosper show: People want to know.  I've also only dedicated 2-5 minutes/wk to the "analysis" of PLEX because there isn't much to say.  At this point, PLEX is not so much a general market indicator as it is a player one.  It doesn't serve to track any macro market moves, instead it only works as a point to discuss "the cost of play" and "the value of loss".

My major take-home for PLEX is this: it's an orouboros.  People think it has value, so it trends up, people panic because it's up, and buy more.  Though I believe the real "value" of PLEX is grossly overvalued, though I hesitate to call it a true bubble, because I have a hard time imagining a "pop" dropping the price back more than 10%.  If you're looking for a place to park long-term value, PLEX is the tool to do it.  If you're actually using your ISK through investment or play, then I'd avoid speculating on PLEX because it lacks a decent periodicity to buy-in (outside of sales outside the game).  

The end outcome, at least in my eyes, is the only value you're having deflated is against PLEX... The same ISK buys the same PVP equipment, or operating budget.  The only value "lost" in this case is how many PLEX you could have bought with that cash.